Jim Chanos: China is “Dubai on steroids”
December 17th, 2009
The New York-based hedge fund manager Jim Chanos has called time on China’s economic party.
In an interview with CNBC’s Halftime Report, Chanos accused the government of the People’s Republic of over-egging the country’s economic pudding. He argued the country’s GDP has been “massively inflated by under-depreciating a very, very, very shaky capital asset base.”
He thinks China’s current economic success is a mirage, since it’s dependent on plentiful supplies of cheap credit. He warned that when these supplies dry up, China’s multiple asset price bubbles will burst and it will be “Dubai times 1000, or worse.”
“Bubbles are best identified by credit excesses, not valuation excesses. And there is no bigger credit excess right now than in China,”
said Chanos, who famously warned G7 finance ministers that financial meltdown was imminent in April 2007. Needless to say he was ignored then, and he’ll probably be ignored now.
Because short-selling is banned in China, Chanos is achieving short positions via derivative plays. So he is shorting commodities and companies shipping raw materials into China.
“Not gold but those commodities involved in the China construction boom. Copper. Cement. Iron Ore.” He added that he is: “looking for plays on the China investment pool, which we think will burst at some point… Demand in China is over-inflated, that is clear.”
“We’re often early. You never get the top tick. You never get the bottom tick. And anyone who says they do is probably … doing the Chinese GDP reports.”
Chanos made his name when he uncovered the creative accounting and other deceptions that ultimately brought down Houston-based energy company Enron. He looks for fundamental flaws in valuations caused by under-estimated or little known problems within companies or countries. He founded Kynikos Associates in 1985, naming it after the Greek word for “cynic”.
Short URL: http://www.ianfraser.org/?p=995
Posted by Ian Fraser
on Dec 17 2009. Filed under Blog.
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I have archived an interview Robert Peston did earlier this year – simply because Jim Chanos came across then as a man of WISDOM and TRUTH, and they are rare in financial matters! Truth in particular!!
It’s a pity we don’t have someone similar with the ‘ear’ of the Government!
We were led to believe that similar market savy was being provided by, the deluded, occupant of No11, now moved next door, or so he boasted before he had the ‘separation’ from his mistress ‘prudence’ – around the time he said he’d abolished boom and bust! Remember that? Who can forget it?
Someone like that might have ‘called TIME’ on the Scottish banks rather than them being part of the mess that’s added some £24K to the debt of everyone in the ‘dis-united kingdom’!!
I do hope they’ve started reading your material, at last, as a way of ‘getting into the real debt-ridden-World’ we all have to inhabit Mr Fraser!! Then those in No10 and No11 may yet include the wisdom of people like Jim Chanos in their management of our economy. It’s obvious from your blog/articles that the regulators are still in denial! Something a PUBLIC INQUIRY application will soon remedy when all HBoS casualties get their copy submitted.
Thank you for your efforts.
Alan Edwards
alanedwards4@hotmail.com or via CBR.me, contacts page c/o Justin for those who wish to forward large attachments of scanned evidence for inclusion in the Public Inquiry ap. PLEASE.
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