The balance of economic power is shifting. China will emerge as the pre-eminent economic giant over the next several years because it has the money to spend to grow its way out of an economic slowdown, unlike most foreign powers, particularly the United States.

The rise of China’s economic prowess will be hastened by this financial crisis. For investors, tapping into this new world economic reality should yield substantial profits once the financial system finally stabilizes.

Some of the more obvious choices for speculation include leading Chinese oil companies, supported by lower tax rates compared to Western energy companies and the country’s most liquid markets – notably in Hong Kong, where China’s largest companies (H shares) are publicly-traded. Also, though still tiny, Chinese and other Asian convertible bonds might emerge as dynamic securities offering companies and investors alike an alternative to traditional and volatile sources of financing.

If the United States dominated the 20th century then it’s probably fair to predict that China will lead the global economy in the 21st century as America’s explosive debt burdens result in a lower standard of living while China’s continues to improve.

Unlike the United States, China is a net creditor nation in 2009. The country holds more than $1.9 trillion dollars of foreign exchange reserves and has been aggressively buying depressed commodities recently, including financing big natural resource deals as it increases its stake in oil and gas projects around the world. The Asian giant has in recent months deployed more than $50 billion dollars acquiring oil and gas and industrial metals at a discount following a collapse of raw materials prices last July.

Last week, China publicly questioned whether it should continue to aggressively purchase Treasury debt – the largest single buyer of such securities – in the wake of monster sized U.S. deficits to bailout the banking sector. After years of a mutual understanding predicated and supported by trade, the United States and China might be heading into a collision course as the Asian powerhouse grows increasingly reluctant to finance America’s current account.

Previous economic shocks to the financial system have resulted in the transition and acceleration of the balance of economic power from one leading power to the next emerging giant. This last occurred in the late 19th century as Germany and the United States challenged Great Britain, as the latter gradually withdrew from colonial imperialism as its finances crumbled. By the end of WW I, Great Britain was relegated to a secondary power, virtually broke, relinquishing that title to Germany, Japan and the United States.

The United States, of course, won’t drop to secondary power status overnight. Its markets remain among the most liquid in the world and it is still the largest economy by far. The United States also maintains the world’s most powerful military complex and that status won’t be challenged for a long time. Yet there’s little doubt that we are now at the cusp of another monumental shift in economic power this century as China overtakes the United States as the pre-eminent center of modern capitalism.

Importantly, while the United States is about to introduce all sorts of new regulations to tame capitalism, similar to the 1930s, the Chinese are likely to become a bastion of free markets enforced by fewer domestic constraints on financing, leverage and, increasingly, laissez-faire economics.

History, however, has not been kind to secular shifts in economic power. The last shift in the global balance of power earlier in the 20th century resulted in two World Wars and the near destruction of capitalism in the 1930s. Let’s hope the United States will engage China more constructively ahead of the next major showdown among economic powers, hastened by the credit crash and the ensuing New World Order.