I’ve visited China over a dozen times in the last decade. And I’ve seen dramatic changes during that time. But nothing compares to what’s happened in the last 18 months. The China of today is a very different place. At the rate changes are occurring, it will be very different another year from now.

The question is: How is the rest of the world going to adapt? Is it going to be able to grow along with China, or will it be left behind? This applies not just to the United States but to any country trying to stay ahead in the 21st century. Here are some considerations.

Laying the groundwork

The first time I was in China, large multinational corporations were the dominant force in China’s economy and job market. Being part of one of these companies was the best job you could have. It meant prestige, good pay, security, and it was the goal for China’s brightest university students.

With the increased presence of multinationals, the number of technology workers exploded. Massive investments in education, research and development gave China a vast number of talented, knowledgeable people in the productive 18-36 age range.

But even that was just the beginning. About five years ago, I began to see a major attitude shift. Rather than thinking they had only two options — a multinational in China or a start-up in Silicon Valley — a new generation of entrepreneurs were beginning to believe that they could build start-ups in China.

The atmosphere is unsettlingly wonderful. I spent time in a slow elevator recently with some young entrepreneurs in Beijing, and after our conversation, I wanted to get off that elevator with them and follow them wherever they were going. Five years ago, they would have been in awe of what everyone else was doing.

The Alibaba effect

Last September, the China-based start-up hit the New York Stock Exchange with a valuation of $167.6 billion, making it the biggest IPO in U.S. history as well as the world’s most valuable online retailer.

Alibaba is based in Hangzhou, about an hour and a half south of Shanghai. Up until a few years ago, the area didn’t have much in the way of industry. Now, it’s home to some of China’s most successful start-ups, many of them spurred by Alibaba’s success. (See chart below.)

Meanwhile, China has dozens of “Silicon Valleys” scattered all over the country. It has sources of capital ranging from government funding to angel investors. As a result, a handful of Chinese companies in multiple cities have raised more than $100 million in funding and are valued in billions.

To me, what’s even more interesting than the success of these companies is the amount of money they’ve raised compared to their valuations. Their valuations have grown as fast as, or faster than, those of American start-ups, but with less capital — all within the last few years.

When I stood on the Alibaba campus, it felt a bit like a Silicon Valley start-up. It’s massive, it’s vibrant and it’s full of energy. It doesn’t have chefs grilling in the backyard or people playing volleyball, but you feel as if you’re on a college campus that just happens to be a very successful company.

Even if you’re in Shanghai or Beijing, if you talk to someone about Alibaba, their eyes light up. There’s a lot to be proud of.

Combine that spirit with China’s significant capital (which it has long invested in other countries, including the United States), and you have a formidable recipe for growth and innovation. While China is still a communist country, it is operating in a highly capitalist fashion.

Feeding entrepreneurism

China has the ingredients that entrepreneurism needs for success:

1. Intellect and great ideas: Today, it’s easier than ever to develop great ideas, and they can ferment anywhere in the world.

2. Access to capital: China has a huge amount of capital, and it’s increasingly investing at home.

3. A market for your goods or services: China is a giant market, and its people are increasingly prosperous. But China also has access to the global market. These days, doesn’t matter where a technology is developed; it can be used anywhere.

4. Talent and human resources: Those multinationals in China created a generation of educated, capitalism-minded workers. Now, China is one of the best places to find new hires, and they are increasingly willing to leave the safety of a multinational for the opportunity at a start-up. This is a crucial difference from how things used to be.

5. A sense of hunger, enthusiasm and confidence: This is the feeling we had in Silicon Valley maybe 10 or 15 years ago. The sense I get when I’m in China is one of effervescent enthusiasm about what is possible. Alibaba gave millions of people a taste of what success feels like. All you need is one success to make you start thinking you can do it, too, and with Jack Ma and Alibaba, you have a million people who’ve begun to think maybe they can do the same thing.

6. China’s very large 19-35 productive age population count!

Will China overtake the West — or has it already?

The United States is the land of Google, Amazon, Apple and Facebook. But Silicon Valley has had 50 years to get to where it is today. China has had less than a dozen, which gives us an idea of where it’s headed and how fast it’s going there.

We nailed venture capital, but we don’t have the answer to everything — and it would be dangerous to think we do. We’ve shown that we can raise money and spend money, but that could skew our expectations and lead to bubbles in valuation. I worry that American entrepreneurs feel good based on how much they’ve raised rather than what they’re actually producing.

Let’s look at how we stack up when it comes to those ingredients for success. Right now, in Silicon Valley, we have a talent shortage. We need more access to capital. Our resources are more expensive. And we’ve condensed our start-up culture into 60 miles in one valley, or in New York City, or Austin or Los Angeles while we should have had 50 Silicon Valleys in America.

Then there’s attitude. When I’m in Beijing or Shanghai, I have a happy sense of enthusiasm about what we can do in the future, and its insatiable; it’s palpable.

In Silicon Valley, the feeling seems to be that if you haven’t raised a billion dollars, you’ve failed. The question is, do we still have that necessary hunger for success, or has entrepreneurism become this industry that needs to feed itself?

It is true that China still lags in some ways. The government structure and business culture make it difficult to tell exactly what’s going on in Chinese companies. Many Chinese still don’t speak English, the primary language of technology, and many of them are still poor. As China moves ahead, everything there is growing more expensive.

But the fact is, any of China’s rising start-ups could easily be the next Alibaba — and they won’t just be catering to the Chinese market. Which means the question is not so much whether China can keep up with the West, it’s whether we can keep up with China.

I’m not trying to alarm anyone. But we need to rethink the idea that the West is ahead of everybody else. Yes, we have more companies, but China is catching up — and doing it with less capital.

This has implications for governments, multinational companies, and anyone who cares about the future success of the world’s technology powerhouses. What’s happening in China is fascinating, and we need to be more mindful of it. If we know more about it, we’ll be able to make better decisions.

I want the rest of the world to feel the same kind of optimism that I feel when I’m in China. But if only one or two countries are keeping up with China, the rest are falling behind. I don’t want us to think we’re ahead in a game that we’re not actually winning.