Click here to listen to David Smith and Bill Emmott debate the economic impact of China and India on the world

Economics may have shaped the Asia of today but politics are forging its tomorrow, says Bill Emmott, the former editor of The Economist, in a striking new book that predicts a dangerous power struggle between China, Japan and India.

Emmott's book is already selling well in temples of globalisation such as Hong Kong airport, no doubt because it stands out among the heaps of corporate drivel in the duty-free bookshops. A “disruptive transformation” is in progress, says Emmott, who edited The Economist from 1993 to 2006. It generates wealth but could set off conflict, he fears, identifying the tangled boundaries of Tibet as one danger zone.

Emmott explains that prosperity is not an automatic stabiliser. “Economic growth is a process, not a destination,” he writes. History has not been abolished or forgotten. War is not inevitable but neither is it inconceivable. The rise of China threatens Japan. The revival of Japan challenges China. The arrival of India as an economic and political actor creates a balancing power. All the while, titanic forces reshape global trade and wealth.

If this looks more like the 19th century than the 21st, it is because globalisation always contends with old-fashioned national interests. That is why President Bush has aligned America with Indian democracy, a move that the author says may come to be recognised as one of great strategic importance and imagination. Remember that.

Rivals is clever and concise. It opens with a look at the power game in Asia and goes on to examine the three countries in turn. It restores Japan to the trinity of big powers in Asia. It weighs up the opportunities offered by China against its primitive political system. It examines the claims of India to first-rate status but says “not yet”.

Emmott then moves on to worry about the three rivals' impact on the environment, talks about their bloody past and points to places where they might clash.Like a polished ambassadorial telegram, the book concludes in The Economist's prescriptive style with nine recommendations to leaders, all of which are eminently reasonable and a few of which may even be followed.

The chapter on Japan is the strongest. Emmott, a veteran Tokyo-watcher, opposes conventional notions of decline and is an optimist about the country. After 1989, when the bubble burst, the Nikkei stock index lost 80% of its value and property prices fell 76%, figures that Emmott compares with the 89% fall on Wall Street between September 1929 and July 1932. But he argues that a reforming prime minister, Junichiro Koizumi, led a “revolution by stealth” to get Japan back in shape; her companies are inventive, her armed forces modern, her leaders more confident. By comparison with China, the Japanese state is a model of Confucian meritocracy. The rule of law has gained strength. Japanese society is sophisticated, ageing but flexible. Above all, it is democratic.

These are stark contrasts to its giant neighbour. The author strives to convey the immensity of the Chinese question, but the chapter on China is essentially a thorough survey of respectable opinion with a heavy dose of statistics, reflecting the debate rather than fermenting it.

India receives a detached assessment of its entrepreneurs, its babus, its tariffs, its castes and its soaring, contradictory aspirations. The emblematic moment here for Emmott is a drive through the streets of Calcutta, strewn with desolate humanity, to feast on caviar and Puligny-Montrachet with a businessman and a brace of local communist politicians.

He quotes many a specialist but his own insights are best. If you start from 1978, when reform began, Emmott says, China stood where Japan did at the Meiji restoration of 1866-8. Then add three decades of progress, accelerated by technology. Now China stands on the threshold of might as Japan did in the 1890s. All the more reason, then, to examine why Japan's quest for resources and prestige led to four wars of conquest between 1895 and 1945. Emmott's theme is managing conflict to avert it and he dismisses fears that China's rise must mean war. But feelings of racial superiority plus a sense of grievance have played into the hands of militant realists in Asia before.

Take the toxic talk of recent weeks as China poured out its resentment against foreign criticism over Tibet. It is wrong to date this rhetoric to Mao Tse-tung's cultural revolution. Linguistically and ideologically, it more closely resembles the texts of Japanese propaganda in the late 1930s - chauvinist, insecure and wrathful.

Through genius or foreboding, Emmott picked Tibet as one of his pivotal flash points, ranking it with North Korea and Taiwan. Most people have forgotten that Tibet is bound up with rival claims between India and China, each occupying territory claimed by the other. In Korea, a collapse of the north could detonate a grab for land by China.

Race, nation, belief and identity can all create an atmosphere of danger that is best restrained by a policy that stops one power emerging supreme. “Fortunately for those of us who love language, there is as yet no neologism that blends these three powerful countries,” Emmott writes. Fortunately for those of us who love freedom, India, China and Japan will continue to remain rivals for quite some time to come.

Rivals: How the Power Struggle Between China, India and Japan Will Shape Our Next Decade by Bill Emmott
Allen Lane £20 pp328

Times Recommends

• The 100 Best Books of the Decade
• The Times picks the 50 best paperbacks of 2009
• The conversation: James Ellroy