re: to datrat i agree jhamman, page-4

re: to datrat i agree jhamman what makes you think this is over...???

If you do then you either bought in too late, which means your impatient and can't wait for a real correct....

Don't buy too much pie in the sky from the Americans on demand destruction blah blah blah....its all speculation over interest rates but the world is bigger than them...we should look to China not America...those fools are just dumping gold on the market, talking up rates rises to get cheap oil for summer...it will last for about a week...and after a month commods will march up again as they realise the only way to bring em down is to start a war...Read professor Ross not some news.com.au journalist...

http://www.theaustralian.news.com.au/story/0,20867,19172673-643,00.html

China's boom is set to last for several decades..

The resources boom driven by China's rapid growth still has a long way to run, writes Ross Garnaut

May 18, 2006
AUSTRALIA is experiencing a resources boom of historic dimensions. Its immediate and important cause is sustained rapid growth in China.

The first reason why the current resources boom has been generated in one country, China, to an exceptional degree arises out of the nature of rapid, internationally oriented economic growth. Such growth, which Australians associate with East Asian development over the past half century, involves backward economies "catching up" with the technologies, institutions and intensity applied in the most advanced economies.

The global frontiers of productivity and investment incomes continue to be extended over time, so latecomers move more rapidly than their predecessors, as the gap is larger between the productivity of their own and the world's most advanced economies.

The second reason why the impact of rapid Chinese growth on international markets is greater than that of any of its predecessors is simply that China has a much larger population - almost twice as large - than all of the established advanced economies taken together.

At the peak of its per capita demand for metals and energy - in a few decades in the most likely case - China will be using considerably more metals and energy than the rest of the developed world combined. It will probably account for the majority of the world's growth in import demand for resource-intensive products for most of the intervening years.

Finally, China, relative to the established developed economies - especially relative to the US, but also relative to other populous developing countries (Brazil and India) that have been experiencing acceleration of economic growth over the past decade - has a low per capita domestic endowment of most economically valuable natural resources.

Following trade policy reforms of the past two decades, a high proportion of incremental Chinese demand for most minerals flows directly into imports. Coal is an exception, and this has major implications for the impact of Chinese industrialisation on the global resources economy.

One only has to identify the possibility of China absorbing twice the amount of resource-based products as the currently developed world to raise some fundamental questions. Is it possible that Chinese economic growth will be hampered by exhaustible resource constraints? Are the energy and other natural resources available to allow China, India and other developing countries to achieve the living standards of the advanced industrial countries? Or will global living standards eventually be limited by a finite amount of essential, depletable natural resources.

Economists today, unlike other social scientists and the general polity, do not fear that the world economic growth will grind to a halt because the world runs out of potential for expanding production of energy, metals or other natural resource-based products. The experience of development, and not only our theory, informs us that higher prices will induce expansion of output and substitution in supply and demand for scarce resources, as well as some modification of the rate and pattern of economic expansion. But while, in the end, supply will equal demand at some higher level of global economic output, the process of adjustment is of great importance, and can affect economic activity in the rapidly growing economies and elsewhere.

In the second half of the 20th century, Japan, Taiwan and Korea experienced periods of sustained and rapid economic growth.

In comparing the Chinese experience so far with that of Japan, Taiwan and Korea two, three and four decades ago. China is different in several ways but most importantly in its size, in the wide "gap" at the beginning of the reform process, and by the gradual introduction of the reforms that gave rise to economic growth.

These may turn out to be decisive differences. They may cause the resources boom associated with its growth in the decades ahead to raise the prices of resource-intensive products by a large amount, not for a few years, but for several decades. This will have important implications for economic development and the distribution of incomes within and between all countries, and on power relations between states in the Asia Pacific and through the world community.

There is no doubt that the rapid growth in Chinese demand for metals and energy will continue as incomes rise in the decades ahead. The analysis in the following section suggests that the Chinese experience may contain some elements of that of Taiwan and Korea, in which economic development was associated with exceptional growth in demand for resources.

A further clue to likely future growth in demand for energy and metals can be found in the analysis of the typical relationship between urbanisation and resource consumption. The extent of urbanisation in China (defined as the proportion of the population living in urban areas) is low for China's income levels. This is to a considerable extent the result of controls on internal migration. These have loosened and urban growth has been rapid in the reform period. The urban population more than trebled, from 172 million to 524 million, between 1978 and 2003. Continued rapid urbanisation can be expected to underpin demand for resources in the decades ahead.

While there are risks to the sustainability of rapid economic growth in China, there is a reasonable prospect that it will proceed at average rates near the average for the past quarter century for several decades.

China's per capita rates of consumption of energy and metals will have approached the average for the developed world by the end of that time. In the absence of major changes in behaviour in response to higher prices or realisation of negative environmental effects, the expansion in China's own consumption will have raised global energy demand by something like 40 per cent of what it would otherwise have been.

With the same qualifications about responses to price, on the expectation that its pattern of growth in demand for metals will be somewhere between that of Japan and Korea, China's proportionate impact on global metals markets will be somewhat larger. The trend increase in Chinese demand may be augmenting global energy demand by about 3 per cent per annum for a considerable period.

We should end with one note of caution. China's rapid growth involves economic, social and political change on a scale that is unprecedented in world history. It is unlikely to proceed over decades without bumps in the road, and an occasional dead end and detour. With China in a few decades consuming annually more resource-based products from world markets as the whole of the currently developed world, the rest of the world will feel every bump through energy and metals as well as other markets.

Ross Garnaut is professor of economics at the Australian National University. This is an edited extract from his address to a Reserve Bank seminar in Sydney yesterday.