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November 11, 2009

China bears

Billionaire hedge fund investor Jim Chanos believes mainland China's economy is on the verge of collapse.

Chang argues that inconsistencies in Chinese official statistics — like the surging numbers for car sales but flat statistics for gasoline consumption — indicate that the Chinese are simply cooking their books. He speculates that Chinese state-run companies are buying fleets of cars and simply storing them in giant parking lots in order to generate apparent growth.

Another data point cited by the bears: overcapacity. For example, the Chinese already consume more cement than the rest of the world combined, at 1.4 billion tons per year. But they have dramatically ramped up their ability to produce even more in recent years, leading to an estimated spare capacity of about 340 million tons, which, according to a report prepared earlier this year by Pivot Capital Management, is more than the consumption in the U.S., India and Japan combined.

This, Chanos and others argue, is happening in sector after sector in the Chinese economy. And that means the Chinese are in danger of producing huge quantities of goods and products that they will be unable to sell.

Posted by Ghost of a flea at November 11, 2009 07:51 AM

Comments

The cement's easy to explain: it's for the bridge to Taiwan once President Zero throws them under his bus.

Posted by: Clayton Barnett [TypeKey Profile Page] at November 11, 2009 10:50 AM

So, time to buy put options for almond cookie futures.

Posted by: Chris Taylor [TypeKey Profile Page] at November 11, 2009 01:24 PM