Since 2009, Jim Chanos has been warning of the real estate bubble in China and he is as concerned as ever given the new government’s actions (and likely inactions). The presentation (from last week’s 2013 Wine Country Conference) below lays out his thesis in gruesome detail and is unreasonably factual. With capital gains tax impositons and curbs on real estate, he is still not optimistic that the new government will enact any of the major reforms that are required – and will be unable to without blowing it all. Simply put (as Yahoo notes): China is adding the equivalent of $2.5 trillion of new debt annually; 30% of China’s GDP growth depends on new credit creation – half outside of normal banking circles; China’s excessive credit creation is invested in the wrong sectors; and every new dollar of debt created is yielding less growth in GDP. “There are myriad ways… to be short the Chinese property bubble,” he adds, noting that, “the new [government]… has no incentive to change the system.”
Chanos’s bearish stance on China extends to Chinese companies too.
“[China] has been a very bad place to keep your money… The Chinese economy has quadrupled in nominal terms in the last 10 years,” he says. “Western investors in the Chinese stock market have basically made nothing in that 10-year period. That’s a staggering indictment of the form of capitalism that exists in China.”
This is China Today:
Full Presentation below: