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Markets are waiting for a confidence vote on the government in the Greek parliament later in the day, a step toward the passage of more spending cuts in exchange for foreign loans.

Meanwhile, international lenders are making an unexpected visit to Athens to check on its resolve to implement painful austerity plans that have caused weeks of public protests and political confusion.

The euro last traded at $1.4340, well above the three-week low of $1.4073 it hit last Thursday, but down from the day's high of $1.4385.

"In the big scheme of things, market players are starting to believe that euro zone policy makers, especially German policy makers, will try to avoid a hard landing in Greece," said Makoto Noji, senior strategist at SMBC Nikko Securities.

If the vote is passed, the Greek parliament will vote on the austerity measures on June 28. Euro zone finance ministers gave Greece two weeks from Monday to approve further spending cuts and tax rises in return for another 12 billion euros in emergency loans.

Were Greece to default on its sovereign debt, it could trigger a global financial crisis in much the same way that Lehman Brothers' collapse did in 2008, markets fear.

Credit rating agency Fitch said on Tuesday it would regard both a Greece sovereign debt swap and a rollover of maturities, even a voluntary one, as a default.

Japan's Nikkei average .N225 was up 0.6 percent at 9412.87, MSCI's index of Asia-Pacific stocks .MIAPJ0000PUS excluding Japan was up 0.7 percent, and indices in Hong Kong and South Korea also rose.

The outlook for the Nikkei was largely rangebound trading for the rest of June, an analyst said.

"At least until the central bank's tankan is out (on July 1), rises are likely to be limited to around 9,500," said Kenichi Hirano, a strategist at Tachibana Securities, referring to the Bank of Japan's quarterly survey of corporate sentiment.

"The market has priced in bad sentiment for the April-June quarter, but if the outlook for July-September is bright, the market may rise further."

Brent crude oil for delivery in August was steady at $111.71 a barrel. ICE Brent futures lost 1 percent on Monday as worries about a resolution to the Greek debt crisis made investors more risk averse, traders said.

Gold inched up to $1,541.29 per ounce by 0150 GMT, after closing at $1,540.95 on Monday. Gold, one of the chief beneficiaries of worries about the security of currencies and other assets, set a record high of $1,575.79 per ounce in early May.

The definitive comments weighed on the euro and underscored how much is at stake for Greece, which is struggling to implement a deeply unpopular fiscal austerity plan necessary to win the next tranche of emergency aid from the European Union and International Monetary Fund.

Fractious euro zone finance ministers are trying to patch together a second aid package for Greece, with more official loans and, for the first time, some sort of contribution by private investors who hold Greek government bonds.

"Fitch would regard such a debt exchange or voluntary debt rollover as a default event and would lead to the assignment of a default rating to Greece," Andrew Colquhoun, head of Asia-Pacific sovereign ratings with Fitch, said at a conference in Singapore.

A month ago Fitch downgraded Greece's credit rating three notches to "B+" and warned it could cut the rating further into junk territory. At the time, the rating agency said an extension of the maturity of existing bonds would be considered a default.

Standard & Poor's cut Greece's rating to "CCC" from "B" on June 13, and warned that any attempt to restructure the country's debt would be considered a default.

Moody's has a Caa1 rating to Greece's sovereign debt, which implies a 50 percent chance of a default within three to five years.

Fitch's Colquhoun also reiterated that the rating agency would place the U.S. sovereign rating on watch negative if Congress did not raise the federal government's borrowing ceiling by August 2, and said if the U.S. government misses an August 15 coupon payment, then Fitch would place the rating on restricted default.

But it added it believed it was very likely that the debt ceiling would be raised and default would be avoided.

Fitch had made similar comments earlier this month and Moody's and S&P have issued warnings along the same lines. But Fitch was the first major ratings agency to say U.S. Treasury securities could be downgraded, even for a short period.

U.S. lawmakers working to rein in rising debt said on Monday they will have to make substantial progress this week to ensure the country retains its top-notch credit rating.

(Reporting by Masayuki Kitano, Writing by Kevin Plumberg; Editing by Kim Coghill)

After two days of crisis talks, the ministers effectively issued Athens an ultimatum, saying the Greek government, parliament and broader society had until July 3 to approve a new austerity package that includes privatization measures in order to secure the release of the next tranche of EU/IMF aid.

Greece risks defaulting on its debts if the next tranche, the fifth installment of 110 billion euros ($155 billion) of loans agreed with Athens in May 2010, is not released in time.

"The approval of the Greek parliament is absolutely essential and it will have to arrive in a timely fashion so we can take a decision on July 3," said Jean-Claude Juncker, who chairs the Eurogroup of the 17 euro zone finance ministers.

"It is clear that the (Greek) debt is sustainable, but the debt will only remain sustainable if Greece fulfills all its commitments which it agreed with the troika," he told reporters, referring to the European Union, International Monetary Fund and European Central Bank.

Finance ministers from the Group of Seven industrialized nations held a second conference call on Monday after discussing on Sunday night the potential impact on global financial markets if Greece were to default.

Both calls were organized by French Finance Minister Christine Lagarde, the favorite to be named as the IMF's new chief this month.

"We have a calendar; we have a roadmap," Lagarde told reporters in Luxembourg. "Efforts have to be undertaken, in the first place by Greece, which leaves here knowing that it has considerable parliamentary efforts to make."

In Washington, the White House restated its view that the crisis could pose a risk to fragile economic recoveries around the world if it spins out of control, but that the mechanism exists to contain it.

"It does create a headwind, and that's why it needs to be resolved for the global economy," said Jay Carney, the presidential spokesman. "We believe Europe, working with the Greek government, can resolve it."

Greece's newly appointed finance minister, Evangelos Venizelos, issued a statement shortly before Juncker spoke saying he would strive to ensure the already reworked austerity program was approved, possibly by June 28.

"The overriding aim is to develop a clear relationship of trust, to stabilize the situation, to have a disbursement of the fifth installment, Venizelos said. "The political time has been compressed a lot. Each day is of extreme importance and hence we cannot afford to waste a single hour."

Shoring up their ability to tackle any further problems in the euro zone, the ministers also rubber-stamped an agreement to increase the effective lending capacity of the current bailout fund, the EFSF, to 440 billion euros by increasing guarantees.

And they said the European Stability Mechanism, the permanent crisis fund that will replace the EFSF from June 2013, would not have preferred creditor status when it comes to loans to Greece, Ireland and Portugal, a change that eased concerns among private creditors about its structure.

ATHENS ON WATCH

In Athens, crowds of anti-austerity demonstrators gathered in the central square outside parliament, but there were no new clashes with police. Power workers began a strike and blackouts were expected in parts of the country.

In parliament, Greek legislators debated the highly unpopular plans, which aim to produce a further 6.5 billion euros in budget savings this year, and 28 billion through 2015, and raise 50 billion euros from the sale of state assets.

On Sunday, Prime Minister George Papandreou appealed to the nation to accept steps that certainly in the short term will make life harder for most citizens.

"The consequences of a violent bankruptcy or exit from the euro would be immediately catastrophic for households, the banks and the country's credibility," Papandreou said at the start of a confidence debate on his new crisis cabinet.

While some financial experts in Greece expect protest to die down and the package eventually to be approved, one Greek newspaper on Monday said the EU had treated Greece poorly.

Blaming "the stupidity of Europeans," the Eleftherotypia newspaper wrote in an editorial:

"Today it's at risk of becoming Europe's little whore. If the euro's 17 members do not understand that to save their economy they must become one federation, the euro will collapse and with it half of its economies."

NEW INSPECTIONS

Inspectors from the EU and IMF will make a further visit to Athens this week -- having just completed an inspection -- to examine changes the country wants to make to the plan, Olli Rehn, the EU's monetary affairs commissioner, said.

In order to impose a deadline on Athens, Juncker said he had already scheduled an extraordinary meeting of euro zone finance ministers for July 3, when the disbursement of the 12 billion euros will be approved -- if Greece keeps its side of the deal.

The euro weakened against the dollar marginally on Monday and the cost of insuring Greek and Italian debt against default rose, a reflection of the increasing risk of contagion across highly indebted euro zone states from Greece's problems.

Ratings agency Moody's said on Friday it could downgrade Italy's Aa2 rating in the next 90 days given concerns Greece's crisis could derail Italy's tepid recovery.

While it seems likely that Athens will eventually get the next tranche, as well as a further emergency loan program of around 120 billion euros up to the end of 2014, the net result is only to buy Greece more time -- the possibility of a debt restructuring in the longer-term, or even default on a portion of its debt, has not gone away.

After their meeting into the early hours of Monday, the euro zone ministers announced that they were ready to put together a second package of loans for Greece, despite the country having missed debt targets in the first package.

The second package, to be outlined by mid-July, will include more official loans and, for the first time, a contribution by private investors, who will be expected to voluntarily purchase new Greek bonds as existing ones mature.

(Additional reporting by John O'Donnell, Daniel Flynn, Annika Breidthardt and Julien Toyer in Luxembourg, and Renee Maltezou and George Georgiopoulos in Athens; Writing by Luke Baker; Editing by Mike Peacock/Ruth Pitchford/Ron Askew/Eric Walsh)

Meeting into the early hours of Monday, ministers indicated that the next tranche of EU/IMF aid would be paid by mid-July, allowing Athens to avoid default, but said it was up to Greece to show concrete progress on plans to cut spending, raise taxes and generate other revenue streams first.

"We are waiting for a decision from the Greek parliament. We are calling for not just the government, but the Greek opposition to support the plan," Belgian Finance Minister Didier Reynders said ahead of a second day of meetings in Luxembourg.

"We are increasing the pressure because there are precedents," he said, referring to Greece's not meeting commitments in the past and falsifying statistics. "We have to be sure that everyone is going to support the plan."

In Athens, anti-austerity demonstrators gathered in the central square outside parliament, but there were no new clashes with security forces. Power workers began a strike and blackouts were expected in some parts of the country later in the day.

In parliament, legislators are debating the highly unpopular plans to cut spending, further increase taxes and privatize state assets, measures already agreed with the EU, IMF and the European Central Bank to bring finances back into line.

On Sunday, Prime Minister George Papandreou asked Greeks to support the austerity steps and avoid a "catastrophic" default, appealing for the nation to accept deeply unpopular tax hikes, spending cuts and privatization plans.

"The consequences of a violent bankruptcy or exit from the euro would be immediately catastrophic for households, the banks and the country's credibility," Papandreou said at the start of a confidence debate on his new crisis cabinet.

Inspectors from the EU and IMF will make a further visit to Athens this week -- having just completed an inspection -- to meet the new finance minister and examine some of the tax measures, Greek government officials said.

Euro zone ministers seemed intent on delivering a message of tough love to Athens, which agreed a 110 billion euro program with the EU in May last year and is expected to get a second package worth as much or more before long.

The fifth tranche of the first program -- the 12 billion euro payment -- is due in July. Without it, Athens has warned that it could default on its debts, an event that would could wreak havoc on global markets and threaten other European sovereigns and banks.

"Greece itself must create the conditions so that the next tranche can be paid out as agreed. That's due in July. It is Greece's responsibility that we're having difficulties now," German Finance Minister Wolfgang Schaeuble said of the next tranche payment.

While it seems likely that Athens will eventually get the next tranche, and a further emergency loan program of around 120 billion euros up to the end of 2014 will also be agreed, the net result is only to buy Greece more time -- the possibility of a debt restructuring in the longer-term, or even default on a portion of its debt, has not gone away.

The euro weakened slightly against the dollar on Monday and the cost of insuring Greek and Italian debt against default rose, reflecting concerns about potential contagion to other states on the euro zone periphery.

Ratings agency Moody's said on Friday it could downgrade Italy's Aa2 rating in the next 90 days given concerns Greece's crisis could derail Italy's tepid recovery.

PRIVATE SECTOR ROLE DEBATED

In a statement issued after a seven-hour meeting in Luxembourg that ended in the early hours of Monday morning, the euro zone finance ministers also announced they would put together a second bailout of Greece, which missed debt targets in the first rescue plan by big margins.

To be outlined by mid-July, it will include more official loans and, for the first time, a contribution by private investors, who will be expected to maintain their exposure to Greece's sovereign debt market through voluntary purchases of new bonds as existing ones mature.

The statement did not say how large the new bailout would be, or give details of the private sector contribution beyond describing it as "substantial."

Euro zone officials have told Reuters the new plan is expected to fund Greece into late 2014 and feature up to 60 billion euros of fresh official loans, 30 billion euros from the private sector, and 30 billion euros from Greek privatization proceeds.

In an attempt to win the cooperation of the European Central Bank, which opposes any scheme that would cause credit rating agencies to declare Greece in default, the ministers said the private sector debt rollover would avoid even a limited or "selective" default.

They did not say how this would be achieved.

Discussions with private sector creditors -- European banks, pensions funds and other investors in Greek bonds -- have already begun, but Germany's Schaeuble indicated that there was still some way to go before there is wide agreement on how they will be voluntarily involved and to what extent.

"We have to talk about that now, with all the institutions involved," he said on Monday. "It's a fine line. On the one hand it has to be voluntary, because otherwise there will be consequences, but on the other hand it must also lead to a result. We will continue to work on that."

(Additional reporting by John O'Donnell, Annika Breidthardt and Julien Toyer in Luxembourg, and Renee Maltezou and George Georgiopoulos in Athens; Writing by Luke Baker; Editing by Mike Peacock)

The euro currency fell on Monday and European stocks dropped after euro zone finance ministers delayed a final decision on extending emergency loans to debt-stricken Greece, dashing hopes for a quick solution to the political impasse.

Euro zone finance ministers postponed a final decision on extending 12 billion euros ($17 billion) in emergency loans to Greece, saying Athens would first have to introduce harsh austerity measures.

The ministers said they expected the money, the next tranche in a 110 billion euro bailout of Greece by the European Union and the International Monetary Fund, to be paid by mid-July. Greece has said it needs the loans by then to avoid defaulting on its debt.

Moody's on Friday threatened to cut Italy's credit ratings in the next 90 days on worries that Greece's crisis may drive euro-zone interest rates higher and derail Italy's fragile economic recovery.

U.S. oil fell as much as $1.04 a barrel to $91.97 on Monday, extending last week's losses.

Ford Motor Co (F.N) is spending $1 billion in an effort to develop a new generation of vehicles for its struggling Lincoln brand, the Wall Street Journal reported on Sunday, citing dealers briefed on the plan.

General Electric Co (GE.N) on Sunday reached a tentative, four-year national labor contract with two key unions that cover more than 15,000 GE workers, or about 11 percent of its U.S. employees.

The Dow and S&P 500 rose on Friday after France and Germany outlined an agreement to aid debt-burdened Greece, but analysts said a recent bearish trend may not be over.

The Dow Jones industrial average .DJI rose 42.84 points, or 0.36 percent, to end at 12,004.36. The Standard & Poor's 500 Index .SPX gained 3.86 points, or 0.30 percent, to 1,271.50. But the Nasdaq Composite Index .IXIC fell 7.22 points, or 0.28 percent, to 2,616.48.

(Reporting by Blaise Robinson; Editing by Will Waterman)

Airbus order flow on day one was expected to be relatively light as sales chief John Leahy was locked in last-minute negotiations on major deals he hopes to announce later in the week.

But industry sources said Airbus was expected to kick off the show with an order for some 30 A320neo planes worth $2.4 billion at list prices to Scandinavian airline SAS.

The European planemaker has targeted an order surge worth tens of billions of dollars, but was left reeling as the world's largest aviation event was jinxed by a series of mishaps including a taxiway collision involving the A380 superjumbo.

The right-hand wing-tip of a test plane for the world's largest jetliner, with a wingspan of almost 80 meters (yards), scraped a building at Le Bourget airport on Sunday and was withdrawn from the air show's traditional flying displays.

A second aircraft, the delayed European A400M airlifter, was also withdrawn from air display after a gearbox problem but will be allowed to perform in a lypast when French President Nicolas Sarkozy inaugurates the biennial event on Monday.

The A380 collision caused dismay hours after the arrival of its new rival -- Boeing's elongated 747-8 superjumbo which is showing its distinctive silhouette abroad for the first time.

The latest version of the legendary 747 jumbo touched down in orange and red "sunrise" livery symbolizing the importance of Asia, whose economic growth is set to dominate aviation in coming years starting with this week's air show.

Industry sources expect some sales of both the A380 and 747-8 during the June 20-26 event but the main joust for market share concerns narrowbody, medium-haul 150-seat planes.

The air show could bring two record deals on successive days as Airbus tries to woo buyers for a revamped A320neo with more efficient engines, saving airlines 15 percent in fuel costs.

"We clearly believe in the business case and the orders you are going to see at the show are going to be astounding," said David Hess, chief executive of engine maker Pratt & Whitney.

Buyers are already camped out in Paris hotels to negotiate the final details of major deals but are aware that Airbus has staked a lot on winning a slew of orders for the A320neo at the Paris show, and some are said to be digging in their heels.

A $16 billion provisional deal from IndiGo to buy 180 A320neo passenger jets, first announced in January, was mired in further negotiations that could spill beyond the air show.

The deal if finalized would set a record for the number of planes in one transaction. But sources say if all goes to plan it is set to be eclipsed by a 200-plane order being fine-tuned between Airbus and Malaysia's AirAsia.

BOEING 777 FOR QATAR

Demand for aircraft is on a sharp rebound driven by demand from Asia's rapidly growing airports and the Middle East.

"Those two markets will enjoy at least one third if not more of the demand increase for global air traffic in the next decade," said Philip Toy, a managing director at Alix Partners.

The Airbus A320neo has also benefited from airline concerns about fuel costs. Boeing said on Sunday it would decide by end-year whether to upgrade its 737 with new engines from about 2016, as Airbus has done, or build an all-new jet in 2019.

"They will sell hundreds but it is hard to tell what is gross and what is net, what is a conversion from an earlier order. There are myriad complications," said Teal Group analyst Richard Aboulafia said of the A320neo.

Orders are likely to include a confirmation of an $8 billion 100-plane order from leasing giant ILFC and another plane order for both Airbus and Boeing planes another big lessor, GECAS.

But it could be Boeing that grabs attention on day one of the show with a sale of 777 wide-body airplanes to Qatar Airways -- a reminder that the two planemakers are battling for market share on a second front after Airbus revamped its A350.

Russia and China will flex their muscles as potential rivals to Airbus and Boeing, especially during a Tuesday visit by Russian Prime Minister Vladimir Putin and some analysts expect surprise sales. But Western planemakers say it will be some time before newcomers mount a serious challenge in civil aerospace.

(Additional reporting by Joanna Partridge, Karen Jacobs, Kyle Peterson, Rhys Jones, Victoria Bryan, Lionel Laurent)

Taking a cue from weak Asian markets, financial bookmakers expect to see the leading European benchmark indexes falling, resuming their seven-week slide as fears of a Greek default prompt investors to dump riskier assets.

Euro zone finance ministers at the weekend postponed a final decision on extending a further $17 billion in emergency loans to Greece, ratcheting up pressure on Athens to first impose harsh austerity measures.

But they added that they still expected the money, the next tranche in a bailout package extended by the European Union and the International Monetary Fund, to be paid by mid-July.

German Finance Minister Wolfgang Schaeuble told a radio station that a vote of confidence in Greece's new government on Tuesday could pave the way for a payout of the next tranche.

Even if a second bailout plan is cobbled together in time, it may only buy Athens a few more months' breathing room before it again has to face the prospect of default or a radical restructuring of it debt that would shock Europe's financial system.

The euro dipped 0.3 percent to $1.4263, edging back in the direction of a three-week low of $1.4073 hit last Thursday on trading platform EBS and taking the wind out of early gains in Asian stock markets.

Japan's Nikkei .N225 ended little changed on the day after having risen as much as 0.7 percent earlier.

The MSCI index of shares outside Japan .MIAPJ0000PUS sank back into negative territory after being up as much as 0.6 percent earlier. It has fallen for eight consecutive weeks.

Losses in equities sapped demand for high-yielding currencies like the Australian dollar and the New Zealand dollar. Other risky assets also came under selling pressure.

Oil prices fell more than $1, extending last week's losses, on worries that Europe's debt crisis and a faltering U.S. economy would curb energy demand. Brent crude slid to just under $112 a barrel.

The iTraxx Asia ex-Japan investment grade bond index was around 116 basis points, nearly 10 bps wider on the month.

"There's still plenty of uncertainty before investors get more sense how much further the three issues will deteriorate," said Dennes Chang, chief investment officer of Jih Sun Securities Investment Trust referring to concern over slowdowns in the United States and China and the euro zone debt problems.

In another sign of risk aversion, high-yield bond funds saw big outflows while India-focused equity funds suffered their seventh straight week of outflows, according to data from fund-tracker EPFR Global.

Elsewhere, the dollar weakened against the yen, falling toward the lower-end of the prevailing range roughly between 79.50-82.00 yen before a meeting by the Federal Reserve's policy-setting arm on June 21-22 which is unlikely to offer any support to the greenback.

Demand for perceived safe-haven assets remained strong.

Yields on ten-year U.S. Treasury notes held around 2.94 percent, well below a June peak of 3.10 percent while the Swiss franc held near a record high against the beleaguered euro.

Gold ticked higher after posting its biggest one-day gain in three weeks in the previous session while silver advanced.

(Additional reporting by Eric Burroughs and Faith Hung in TAIPEI, and Andrew Torchia in LONDON; Editing by Kim Coghill)

They are buying up competitors, investing in new capacity and speeding expansion projects to feed breakneck growth in raw materials demand in the world's top consumer of commodities.

Rio Tinto (RIO.L)(RIO.AX), Xstrata (XTA.L), Nyrstar (NYR.BR) and Noble Group (NOBG.SI) in the past week have announced plans to merge or expand output or capacity -- risky bets if Roubini's scenario for the Middle Kingdom comes to pass.

"There is a meaningful probability of a hard landing in China after 2013," Roubini, closely followed by Wall Street because he predicted the U.S. housing meltdown that precipitated the global downturn, told a financial conference in Singapore.

But his dire warnings are at odds with the actions of raw material producers.

"(Australian) mining investment grew from $20 billion in 2009 to $50 billion in just a year, and that suggests the miners don't think Roubini's scenario will play out," said Ben Westmore, commodities economist at National Australia Bank.

"Those plans are likely predicated on some slowing in prices, but there is still obviously a lot of money to be made."

China's surging appetite created a commodity boom and a step-change for the market in the past seven years, with copper rising from around $2,500 to a series of record highs above $10,000 a tonne, only briefly interrupted by the global financial crisis.

Iron ore prices have leapt to almost $200 a tonne from $32 in 2004.

World No.2 iron ore miner Rio Tinto will speed up plans to expand iron ore production by 50 percent to 333 million tonnes a year by the first half of 2015, six months ahead of its earlier target.

"The demand outlook continues to be strong with supply lagging elsewhere in the industry and we are seeing new supplies proving slower to materialize than predicted," Rio Tinto iron ore division head Sam Walsh said in a statement.

Xstrata Plc will start exporting iron ore to Asian buyers from Australia on Wednesday as part of an A$589 million redesign of its Ernest Henry copper and gold mine, the company said.

Exports of the magnetite-type material at a rate of 1.2 million tonnes a year are a key component of Xstrata's plan to transform the Ernest Henry mine from an open-cut design to an underground one, the company said.

Other companies are also seeking to expand capacity through mergers, including Nyrstar (NYR.BR), the world's biggest zinc producer, which wants to acquire Canada's Breakwater (BWR.TO) for C$619 million ($639 million) as it carries out its strategy to buy more mines and increase self-sufficiency.

NEITHER GLOOMSDAY NOR DOOMSDAY

Roubini said investment was already 50 percent of China's gross domestic product and that sixty years of data had shown that over-investment led to hard landings, citing the Soviet Union in the 1960s and 70s, and East Asia before the 1997 financial crisis.

"I was recently in Shanghai and I took their high-speed train to Hangzhou," he said, referring to the new Maglev line that has cut traveling time between the two cities to less than an hour from four hours previously.

"The brand new high-speed train is half-empty and the brand new station is three-quarters empty. Parallel to that train line, there is a also a new highway that looked three-quarters empty. Next to the train station is also the new local airport of Shanghai and you can fly to Hangzhou," he said.

But other analysts argued that China's immense urbanization program meant that although some infrastructure may be under utilized at present, it would find customers in the years to come.

"You don't build infrastructure expecting to run at capacity on day one. You build based on future demand. The other question you need to ask is what is a hard landing for an economy growing at 10 percent?" said a bank analyst in Shanghai, not authorized to speak to the media.

"Is it a slowdown to 5 percent? Even that implies, assuming demand for commodities rises in line with GDP, an additional 400,000 tonnes of copper or more than 30 million tonnes of iron ore. China is about 'boomsday'. The risk of 'gloomsday', let alone doomsday, is slim."

Since 2007, China's GDP has grown by just under 10 percent on average each year, while copper demand has increased by an average of 25 percent annually and iron ore by 16 percent.

"Remember when you build a factory in China to make cars, you also have to build homes for the workers, hospitals, schools, shops and other infrastructure. All that adds to the intensity of commodity consumption, and that won't end for some time," the analyst said.

Already almost half of China's 1.34 billion population live in cities and towns, according to a census in April, up from 36.1 percent in 2000, although the previous census used a different counting method.

If that trend continues, over the next ten years around 200 million more Chinese rural inhabitants -- two thirds of the population of the entire United States -- will need housing, workplaces and household goods.

"Some of these analysts take traditional free market supply-demand techniques and try to apply them to a socialist market economy. It just doesn't work," said Jonathan Barratt, managing director of Commodity Broking Services in Sydney.

"The massive amounts of infrastructure just to keep up with population growth even as it slows will mean any dip will be well supported."

(Editing by Michael Urquhart)