More from Chanos on the Chinese property bubble
Given my post on Jim Rogers’ doubting Chanos’ knowledge about China, I thought it appropriate to post the latest Chanos interview on the China property bubble.
This call by Chanos is really setting us up for some seriously entrenched camps of pro-China bulls (like Rogers)against China sceptics (like Chanos, but also like Andy Xie). Is this a repeat of the U.S. property bubble debates of 3 and 4 years ago? It sure seems that way right now. Jim O’Neill of Goldman Sachs, like some others, is latching on to Chanos’ quip in which he called China “Dubai times a thousand.” See how he answers O’Neill’s criticism below. I would love to hear Stephen Roach’s take on Chanos’ property bubble call. I certainly believe there is a bubble – and, since all bubbles end in tears, this one will too.
The larger question is what effects will this have on Chinese and global economic growth over the medium-term. Chanos says he’s agnostic right now. But, clearly, a burst bubble can’t have positive effects. At a minimum, it would delay any increases in Chinese domestic consumption. Therefore, a burst bubble may gear Chinese policy that much more toward exports.
Bloomberg says “Chinese banks issued a record 9.6 trillion yuan ($1.4 trillion) of new loans last year”. With a total GDP of around $4.33 trillion one year prior (2008), that credit-driven addition to aggregate demand is equivalent to about 1/3 of GDP! (BIG!) The onus is certainly on the China bulls to explain either how that can be sustained indefinitely or what happens as the credit-driven boost to both asset demand and consumption/investment demand shrinks (let’s not even consider it going into reverse via debt reduction like Japan’s did!)… (I haven’t actually watched any of these videos so maybe someone does tackle it?)