Is the Chinese economy is on a bubble? The China bubble is a subject passionately under discussion among business leaders, economic experts, commodity analysts and investors.
Leading investment pundits have been coming out with their predictions on whether China is sitting in a bubble economy or not. Short-sell veteran Jim Chanos recently said that China is another Dubai, sitting in a precarious excess credit circle. Since excessive credit in China is ballooning, it might burst soon, Chanos predicted.
Many investors have panicked ever since Chanos’ forecast that China will crash under unbridled growth without economic fundamentals. A crash in China would mean that commodities markets—the main driver of the Chinese economy—will collapse.
Global commodities investment guru Jim Rogers, who has been a passionate investor in the Chinese market, has hit back saying Chanos does not know the fundamentals of the economy in China. Rogers further blasted Chanos saying people like him who did not know to pronounce the word China some years back are now experts on the Chinese economy.
While Rogers and Chanos are warring on China, let us look at what is another celebrated commentator—Marc Faber—has to say on the China bubble. Faber, publisher of the Gloom, Bloom, Doom report almost agrees with Chanos on the China bubble forecast, not with Jim Rogers.
Faber agrees with Chanos that China is caught in several serious economic problems. He says: “There is excessive credit in China, but the oversupply of money has been used to build the infrastructure, education, and R&D, rather than consumed. And that is the difference between China and US.”
Faber is concerned about the bubble burst syndrome in China. But unlike Chanos, Faber does not see the Chinese bubble bursting so soon. “The China bubble will not burst soon. I don’t see it imminent.”
“It is very difficult to pinpoint a day when China will implode, I don’t think it will happen right way,” Faber added.
China has, indeed, been the fastest growing economy in the 2000-2009 period. There has been a boom in commodities production and consumption in China. China has overtaken several countries including India, US, Australia and South Africa in the consumption and production of several commodities including base metals and bullion.
There has been a flood of bank lending in China that has been boosting the Chinese appetite for manufacturing, gold mining, agriculture, farming etc. But is it all over?
Let us wait and watch who will be right in the Chinese bubble forecast: Jim Rogers, Jim Chanos or Marc Faber.
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