The China Bubble
According to a recent article in the New York Times, James Chanos, the massively successful hedge fund manager who predicted the fall of Enron, Tyco, Boston Market, and the current housing collapse has been pointing to (and preparing for) the Chinese bubble to burst.
The key problems: huge amounts of speculative capital, a largely unfounded building frenzy, and a lack of financial transparency. While many have been quick to dismiss Chanos’s claims as hysteria (largely through sloppy ad hominem attacks), he does seem to have a point, especially with regards to the opacity of pretty much everything in China. GDP growth figures could well be distorted, banks could be insolvent (and some likely are), and large numbers of products manufactured in China today could well be destined for storage or the scrap heap. The danger is that – given the high likelihood that these things are occurring today (to some degree) – we won’t really find out until it’s too late. As many in the world have been looking to China to help pull the global economy out of its current slump, the prospect of a massive correction should be very troubling.
Take a gander at the full article (linked below) and try to figure out if we’ve got cause for concern.
No related posts.
Interesting points. I have to agree more with Jim Rogers at this point since he is significantly more knowledgeable about Asia and resides in Singapore. I do think a cause for concern has to be the eventual tightening of the American consumer’s budget. I do not see it reverting back to the good old days.
The China bubble seems to be something that many are more and more concerned about as stories of China’s rapid economic rise populate the media. However, something to note is that China is not exactly a free market. The government can interfere (and will) when things start to grow out of hand.