Also, in relation to MMX I don't think the US economy is a very...

Also, in relation to MMX I don't think the US economy is a very good indicator. Better to look to China's economic growth. Take a look at this opinion from Nobel Prize winning economist Michael Spence (advisor to the Chinese government).

http://www.smh.com.au/business/china-its-full-speed-ahead-20110803-1ibm5.html

China: it's full speed ahead
Peter Martin
August 4, 2011


ASK the Nobel Prize-winning economist who has advised China on its latest five-year plan the question on every Australian economists' lips, and he does not flinch.

"How long have they got? How much longer can China's extraordinary explosion of economic growth continue," I ask Michael Spence down a phone line to Italy, where he lives six months of the year.

"I think the answer is something like two decades, in the later part of that they will start to slow down," he says ahead of his book tour of Australia to promote The Next Convergence - the Future of Economic Growth in a Multispeed World.

Michael Spence: key insight.
He is a good person to ask. As well as advising China on growth for the past four years, he has chaired the World Bank-sponsored Commission on Growth and Development, set up to distil all that is known about how to drive economic growth and cut poverty. His key insight about China is striking - that the sudden burst of growth that has revolutionised global economics and politics was the result of a conscious decision made by just a handful of people. Deng Xiaoping and a few comrades could have decided to throw the switch to growth later, perhaps even in 20 years; they could have decided to do it earlier, although not before Mao died and the Gang of Four were arrested in the late 1970s.

Deng and cronies decided first to allow the limited use of market prices for farmers selling production over and above what was required, saw the results were impressive, and then semi-secretly invited experts, including the then president of the World Bank, Robert McNamara, to give them advice on what to do next.

Some of the meetings took place on boats on the Yangtze River.

"What Deng asked for was not primarily financial capital, even though he was talking to the World Bank," Spence writes. "Rather, it was knowledge. He realised intuitively the missing piece was know-how."

Spence himself is now providing that know-how. When he sent over his thoughts for the latest five-year plan, which began this year, he felt his ideas being sucked out of him.

"They ingested,'' he tells BusinessDay. ''They didn't just kind of get a couple of people to read it, they sent to everyone involved in the five-year plan.

''It doesn't mean they believe it. This is an economy that ingests ideas.''

It is the ability to take what works from the West that has seen China's industrial revolution spark growth rates far faster than those during the first and second centuries of the West's revolution.

Starting very late has allowed it to use ideas, processes and machines that have already been tested to supercharge what used to happen more sedately.

When will it stop? Greenhouse gases might put a stop to it. More on that later. But otherwise it is hard to see a roadblock.

"This is a country with a per capita income of $5000,'' Spence says. ''That's a huge improvement over $300, but it is a long way from $25,000. What happens when you get to $20,000, whether you turn out to be Italy or the US or Germany, depends on a whole new set of factors.''

But the immediate challenge over the next two decades is to get over the middle-income transition, to get to $10,000.

"There are risks, the thing could blow up politically. It's not a done deal.

''But if income is $5000 now, in 15 years it could easily double twice, even if things slow down a bit in the later stages. By then China will be a middle-income country.

''In terms of sheer economic size, all China has to do is double once more, then it will be comparable in economic size to the US or to Europe, depending what happens to Europe."

But doesn't China's sustained growth depend on the rest of the US and Europe staying out recession?

Not any more, says Michael Spence. "Right now the emerging economies that are trading with each other are self-sustaining. They can grow even if the major industrial powers just plug along.

"If you go back 10 years that wouldn't have been possible.

''Weak growth in Europe or the United States of 1 per cent or 2 per cent would have dented growth in China and associated emerging nations. But not now. China will become increasingly decoupled as time moves on. Its own emerging middle class will drive its own growth."

But surely its billions of citizens will never get to the stage where they pump into the air pollutants at the rate of around 20 tonnes per person per year as do Australians and Canadians and residents of the United States? No, they never will, says Spence.

They will use much more energy per person. At the moment it is less than five tonnes.

"But they realise they will have to deviate from our growth pattern before they get to 10 tonnes per person, where the Europeans are now. They will never get to Canadian or Australian emissions.

"This is a new realisation, maybe just two years old. They are set to become so big economically, to have such a big stake in the planet, that they realise they will have to save the planet.

"In the US people find China's growth confronting. I know Australians don't. It looks as if it could work out well."

Michael Spence will speak at the Grattan Institute in Melbourne on August 15 and at the National Press Club in Canberra on August 17.