Illustration: Rocco Fazzari
If you want a lead on how the world economy is affecting our economy, take my tip: forget the United States and study China.
That's not easy, however, because the Chinese publish much less information about their economy and some of what they do publish isn't necessarily reliable.
But it's clear from its latest statement on monetary policy that the Reserve Bank is putting a lot of effort into monitoring the Chinese economy.
Why is China so important? Well, it's the second-biggest economy in the world (measured on a purchasing power parity basis), more than half the size of the US and about twice the size of Japan, with the third-largest share of world trade after the US and Germany.
More pertinently, China is at the heart of the Asian trading region, and these days ''non-Japan Asia'' accounts for more than half our two-way trade in goods. Add Japan and you're up to two-thirds.
China is now our biggest trading partner in goods - although Japan would still be top if you included services - with its share of our exports of goods rising from less than 5 per cent to more than 22 per cent in just the past 20 years.
Its share of our exports of iron ore has gone from 20 per cent to 80 per cent over the same period, while its share of our exports of coking coal has shot up from nothing much to almost 30 per cent in the past 12 months.
China's continuing demand for our commodity exports does most (along with a bumper wheat harvest) to explain why, almost alone among the decent-sized economies, our exports have been growing while everyone else's have been collapsing.
Over the nine months to June, the volume of our exports of goods and services rose by about 2 per cent, whereas the exports of the US, Britain, Singapore, Canada, Taiwan and Germany fell by 10 per cent or more. Japan's fell by almost 30 per cent.
What's more, the rebound in China's demand for our stuff means that though our terms of trade - the prices we receive for our exports relative to the prices we pay for our imports - are now expected to deteriorate by about 20 per cent from their peak last year, they'll still be about 45 per cent better than their average over the 20 years to 2000.
Prices on the spot (single-purchase) markets for iron ore, coal and other commodities have actually risen over the past three months.
But if China's exports to a deeply recessed world economy have collapsed - and their volume fell by more than 20 per cent over the nine months to June - how can its imports from us be holding up so well?
Short answer: because there's more to economic growth (and hence a need for imports) than just the production of exports - especially if you're a rapidly developing country with a population of 1.3 billion.
Longer answer: this is what all those smarties who thought a collapse in China's exports proved the folly of the belief that China's economy could be ''decoupled'' from the developed world got wrong.
Most growth in most economies comes from ''domestic demand'', not from ''net external demand'' (exports minus imports). Domestic demand consists of consumer spending, home building and business investment, plus government consumption and investment spending.
To put it another way, most of the trade that occurs in an economy is trade between people within that economy, not with foreigners.
An economy that engaged in no external trade could still grow, although it would forfeit the ''gains from [foreign] trade'', which are the gains from specialisation and exchange.
I was always a believer in the decoupled argument because I believed that, should a world recession rob China of much of its export income, the managers of its economy would lose little time in switching the engine of growth from exports to domestic demand.
And, as the Reserve explains in detail, that's just what they've done. When the financial crisis deepened in September, the Chinese found themselves in a similar position to us: hauling on the brakes because of a concern about domestic inflation pressure.
The Chinese announced a major budgetary stimulus package in November. They also eased monetary conditions, including the easing of various credit controls, directives to banks to substantially increase their lending, the reduction of banks' reserve ratio requirements and a significant lowering in lending interest rates.
The budgetary stimulus involved increased public investment in infrastructure, including reconstruction in Sichuan province following the earthquake in May last year. This investment has been stronger away from the more-developed coastal provinces and reflects efforts to improve transport.
But it's also involved direct efforts to increase household spending, including incentives to purchase housing, cars and other durable goods, especially in rural areas.
Investment in fixed assets has risen by more than 30 per cent since November and car production has risen by 75 per cent since December. Cement production is also well up.
Housing activity is strong in response to lessened credit restrictions on developers, lower down payments and higher interest-rate discounts for first-home buyers, and cuts in taxes on home sales.
Although China's quarterly growth slowed to 0.5 per cent in the three months to December, it picked up to 1.5 per cent in the March quarter, then a roaring 4 per cent in the June quarter (that is, growth at an ''annualised rate'' of more than 16 per cent). Over the six months to June, credit grew at an annualised rate of about 45 per cent.
The good thing about all this is that whether the Chinese get their growth from exports or from domestic infrastructure investment, housing and consumer durables, they need lots of steel. Steel production is up 20 per cent since December. And the chief ingredients of steel - iron ore and coking coal - are precisely what we sell them.
Now, if you want to be pessimistic, you can say the Chinese won't be able to maintain the present rate of budgetary stimulus, so their economy will soon fall back.
But that ignores the longer-lasting effect of the monetary easing and the central government's strong budgetary position - a budget deficit of only about 4 per cent of gross domestic product and public debt level of about 20 per cent - not to mention the likelihood that growth will be self-sustaining to some degree.
And I know this: right now I'd much rather have our economy coupled to China than the US.
Ross Gittins is the Herald's Economics Editor.