No, that’s not quite right. We know China’s been undergoing some massive growth in recent years–real growth fueled by economic liberalization and technological progress. So a more accurate way to ask this would be: are the numbers we have seen for Chinese economic growth lately deceptive because they are part of an inflationary boom cycle with an inevitable bust coming?
Billionaire investor James Chanos seems to think so. And although I’m no expert investor (I’m a nineteen-year-old college kid), I do have the ability to root out financial facts online. And according to Bloomberg, the Chinese money supply (M2) has inflated by 25% last year. Due to the massive government-backed construction investments in China that are used to keep growth figures up to the target of 9%, there is systemic malinvestment in high-rise buildings, which are being oversupplied. This sort of credit-fueled boom is exactly what should be expected in an inflationary economy.
James Chanos is the guy who told the world he thought Enron was going to collapse before other people. So here’s his explanation of what he sees happening:
Of course, there is this prevalent attitude that China is some sort of massive ever-growing beast that can’t slip up. But Chanos seems to make sense. He’s one of those fellows known as a “short-seller.” Despite their reputation for being filled with malice and hatred and evil, short sellers perform an important function in the market by finding bad investments and making people aware of them. His investment firm is called Kynikos (Greek for “cynic”), and routinely bets against companies.
is china’s spectacular recent growth a mirage?
No, that’s not quite right. We know China’s been undergoing some massive growth in recent years–real growth fueled by economic liberalization and technological progress. So a more accurate way to ask this would be: are the numbers we have seen for Chinese economic growth lately deceptive because they are part of an inflationary boom cycle with an inevitable bust coming?
Billionaire investor James Chanos seems to think so. And although I’m no expert investor (I’m a nineteen-year-old college kid), I do have the ability to root out financial facts online. And according to Bloomberg, the Chinese money supply (M2) has inflated by 25% last year. Due to the massive government-backed construction investments in China that are used to keep growth figures up to the target of 9%, there is systemic malinvestment in high-rise buildings, which are being oversupplied. This sort of credit-fueled boom is exactly what should be expected in an inflationary economy.
James Chanos is the guy who told the world he thought Enron was going to collapse before other people. So here’s his explanation of what he sees happening:
Of course, there is this prevalent attitude that China is some sort of massive ever-growing beast that can’t slip up. But Chanos seems to make sense. He’s one of those fellows known as a “short-seller.” Despite their reputation for being filled with malice and hatred and evil, short sellers perform an important function in the market by finding bad investments and making people aware of them. His investment firm is called Kynikos (Greek for “cynic”), and routinely bets against companies.
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