The Conservative Cave
Current Events => Economics => Topic started by: NHSparky on January 11, 2010, 09:15:49 AM
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Contrarian Investor Sees Economic Crash in China
By DAVID BARBOZA
Published: January 7, 2010
(c) New York Times
LINK (http://www.nytimes.com/2010/01/08/business/global/08chanos.html)
(excerpt)
SHANGHAI — James S. Chanos built one of the largest fortunes on Wall Street by foreseeing the collapse of Enron and other highflying companies whose stories were too good to be true.
Now Mr. Chanos, a wealthy hedge fund investor, is working to bust the myth of the biggest conglomerate of all: China Inc.
As most of the world bets on China to help lift the global economy out of recession, Mr. Chanos is warning that China’s hyperstimulated economy is headed for a crash, rather than the sustained boom that most economists predict. Its surging real estate sector, buoyed by a flood of speculative capital, looks like “Dubai times 1,000 — or worse,†he frets. He even suspects that Beijing is cooking its books, faking, among other things, its eye-popping growth rates of more than 8 percent.
“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.†He is planning a speech later this month at the University of Oxford to drive home his point.
As America’s pre-eminent short-seller — he bets big money that companies’ strategies will fail — Mr. Chanos’s narrative runs counter to the prevailing wisdom on China. Most economists and governments expect Chinese growth momentum to continue this year, buoyed by what remains of a $586 billion government stimulus program that began last year, meant to lift exports and consumption among Chinese consumers.
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This is the guy who predicted Enron's fall. What? You mean too much easy credit could lead to a speculative bubble and subsequent crash? Sounds like what the Dems want to perpetuate here!
Another thing to keep in mind--our "porkulus" plan last February, while larger in total dollars ($787B vs. $586B), was much smaller in terms of percentage of GDP (5.5 percent for USA versus 13.5 percent for China.) Their total GDP is still barely 30 percent of ours, and per capita GDP in China is less than 8 percent of the USA per capita GDP. Bottom line, they still need us more than we need them, and their credit markets would be hurt far worse than ours if/when a Chinese bubble bursts.