James S. Chanos the man who foresaw the collapse of Enron in 2001 says all hand on deck the economic bubble of the People’s Republic of China is about to pop send the world largest market hitting the rocks due to the government massive stimulus projects.
Chanos the President of Kynikos Associates, one the largest hedge funds sees trouble for China. He points out China’s real estate bubble based on heavy speculation. Chanos says,”Dubai times 1,000 — or worse.,” He does not believe what coming out of China. He believe it that the Chinese government has played fast and loose and cannot quantify its growth rates of eight percent a year.
“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.” Chanos expected to speak on the subject at conference at Oxford University in United Kingdom.
Chanos is running contrary to the to belief that China will be the engine of growth due to its government $586 billion infrastructure spending.
Chanos critics who believe China the growth the world-wide economy needs questions his reasoning. Jim Rogers of Quantum Fund with George Soros is not buying what Chanos is selling. “I find it interesting that people who couldn’t spell China 10 years ago are now experts on China,”says Rogers.”China is not in a bubble.”
Chanos joined other people who are bearish on China like colleagues Jim Grant of “Grant’s Interest Rate Observer” and friend of Chanos said “In China, he seems to see the excesses, to the third and fourth power, that he’s been tilting against all these decades.”Grant said,”He homes in on the excesses of the markets and profits from them. That’s been his stock and trade.”
Chanos states that investors been fooled by the Chinese producing too much goods. In December he appeared on CNBC selling short place in companies involved in China to make money.
In November interview with Politco he says, “The Chinese are in danger of producing huge quantities of goods and products that they will be unable to sell.”
In recent months a growing analysts including some in China are concerned with an asset bubble.
“It’s going to be a bust,” said Gordon G. Chang, whose book, “The Coming Collapse of China” (Random House), warned in 2001 of such a crash.