Jim Chanos, whose hedge fund, Kynikos Associates, based in New York, has $6 billion under management, is warning on the China myth, saying Beijing is cooking its books, faking, among other things, its eye-popping growth rates of more than 8%. According to Chanos, China’s GDP numbers are massively inflated by under-depreciating a very shaky capital asset base.
Chanos also said he sees the country’s hyperstimulated economy heading for a crash, rather than the sustained boom that most economists predicts. He thinks China’s surging real estate sector, looks like “Dubai times 1,000 — or worse.”
“Bubbles are best identified by credit excesses, not valuation excesses,” he said in a recent appearance on CNBC. “And there’s no bigger credit excess than in China.”
(starts around the 4:40 minute mark)
I think that China story will keep going on for a while. It will only crash once the US dollar has evaporated.
Remember in 2009 lots of factors influenced the decline of production of raw materials and products in China. The huge snowstorm in January and February that stopped China in its tracks, cutting electricity, stopping transport and freight trains, stranding millions of Chinese across the nation. Getting production back on-line took awhile. The Olympics influenced Chinese government to shut down production of polluting industries from May until October to clear the air for the Olympic and Special Olympic Games. This drove up prices of raw materials and products dramatically. They also limited freighters access to Chinese ports. This stalled exports from leaving Chinese shores. What happened in October? The economic crash that influenced many Americans to vote for Obama, a huge mistake. China is now facing similar issues this year with the weather and new rules on lead content for children’s products on their way to the US, not to mention the debt America owes China.