James Chanos predict collapse in China

Contrarian Investor Sees Economic Crash in China

  • I think I have heard that prediction for at least a decade now. So how about it. Are they all full of shit or is China a house of cards that just hasn’t toppled yet?

It’s a police state. Their exchange rate is controlled by the Communist Party. They claim certain rates of GDP growth, but who knows what’s really going on? They could be much weaker than they claim, much stronger than they claim, or anywhere in between. They’d change clocks and calendars to suit their interests if they could somehow censor the true time and date.

They produce things. They have manufacturing. A real fake economy is one that sells strange and new banking instruments . As long as they produce sellable goods ,they have a bottom that is reasonably high.

I can certainly see them experiencing a couple burst bubbles, but I would imagine the country will keep going on strong.

China has the advantage of the ability to do anything. If the High King orders that something be done, no matter what, that thing is done. So long as the High King makes wise decisions and the people feel that he is making wise decisions, all those burst bubbles will be minor blips on the road to modernization. That train just ain’t going to derail.

True, it’s possible that whoever or whatever secret organization that is currently leading China has become incapable recently, but I haven’t seen any evidence of that. China has come across as quite shrewd, fairly consistently, right through the last decade.

And ultimately, nearly all of China’s economic power comes from its number of people. If you take away all of Switzerland’s money, all they’ve got is some lakes and mountains. You take away all of China’s money and they’ve still got billions of laborers and millions of factories. So much of the world’s supplies are made in China, in fact, I doubt the rest of the world could afford to let China fail.

So how long before they enslave us?

That, plus they’re really crafty : money can get into the country, but it’s never ever getting back out. Foreign businesses may open up in China, but the profits can only go towards more business within China - any profit trying to get out is taxed at close to 100%. Which doesn’t seem to stop gwailos trying to cash in on China’s future, for some reason I don’t quite understand.

It’s a marvelous racket they’ve got going, really.

In related news, China just overtook Germany as the world’s largest exporter of goods.

Furthermore, the Chinese value stability more than almost anything else; certainly more than an abstract concept like freedom. Nobody wants the govt to collapse.

You mean sort of like the economy of the United States in the 1930s?

What do you think would happen if China overbuilt factories and real estate and the markets for their products dried up? Or if those businesses couldn’t afford to pay back the 7 trillion yuan (1 trillion US$) lent out by Chinese banks.

I don’t think China is going to “collapse”. But all the hype about China and it’s endless rapid growth certainly feels like speculative bubble talk.

China will of course reach the end of a bubble, and their upward trend will be saw-toothed. To qualify it as a collapse sounds a little hystrionic to me.

Do you have a cite for this? I mean I realize that companies aren’t sooper smart all of the time, or maybe they’re banking on future political changes, but I can’t think that they are that dumb

He cannot come up with a cite for it because he’s dead wrong. Where does he think all the bailout money was borrowed from?

Well, to be fair, it wasn’t McDonalds China buying US government debt - it was the Chinese government.

And selling debt doesn’t net you a profit, which is what Kobol suggested was being taxed.

I’m not quite sure I understand your statement.

His claim was that the profits aren’t taxed at confiscatory rates, so long as the profits do not exit the country.

Yea, I was questioning Mswas’s objection to the claim, since getting a loan isn’t profit (sort of the opposite, since it will eventually be a profit for the entity loaning the money), and thus wouldn’t be exposed to the tax.

I’m not too sure about the specifics - economics have never been my cup of tea. All I know is my mother’s company opened an office there a couple years ago, and has been facing this issue ever since it started turning profits. The money can either stay in the local office, or be taxed to Hell and back.

I see her on Wednesday, if you wish I’ll ask her for more details then. For what it’s worth, my initial reaction to her explaining the situation to me was the same as yours and I asked her why they’d keep the office going if they couldn’t make money out of it. She started explaining… and my eyes glazed over a few seconds later. As I said, finances and me don’t mix :o.

Yes, but the idea that Chinese companies can’t invest out of China is pure nonsense. Chinese companies invest in foreign projects all over the world.

If there is some evidence that foreign investment IN China is somehow limited to reinvesting in China, I’d like to see some evidence of that, because once the money leaves Chinese bank accounts, it’s out of China. China could not operate in the world economy with the kind of protectionism that kobal2 is referring to. Investors wouldn’t invest in China, and China wouldn’t have foreigners to help facillitate foreign investment elsewhere.

Whatever it turns to be, it will be fascinating. A Communist nation turning to capitalist economics to advance its goals? Damned interesting, and, when you examine it, it fits right in traditional Marxist theory, which holds that a period of capitalist exploitation and growth is an essential precursor to the socialist society. You must first raise up a capitalist industrial society in order to advance to the next level.

The really interesting part is that China is a very communal culture to begin with, they are selling this idea of great and widespread sacrifice to create a China for the benefit of their children and grandchildren. And the people, by and large, seem to be buying it.

There is a rattlesnake in the ointment, and that is the ongoing ecological effect. A good analogy would be the Stalinist industrialization of the Soviet Union. Build the steel mill, and if you poison the river to do it, tough noogies, full speed ahead.

If this fails, I doubt it will be because of the usual economic problems of credit and growth (even though their rate of growth is so astonishing, it simply has to be bullshit…), but the effect of such industrialization on the health of the people. People gotta breathe to work, and you gotta drink water, not cadmium stew.

So, my two bits says if it collapses, it will be because of a ruined ecology. And if it doesn’t, that in itself will be damned interesting.

So…turning towards capitalism is all part of the Marxist plan to become the perfect socialist society? Wow. Took em long enough to do it, but I guess they are in it for the long haul…

Um, anyway, I think China will definitely hit the wall sometime in the next 20 years or so. I don’t know if China will collapse, but it will certainly have a profound effect on their future direction. Will they move to open markets? Will the old guard manage to force them to regress back towards their former closed economy? If they DO pop their bubble (inevitable I’d say), what effect will that have?

Or is it all part of a deeper socialist plot to move to the perfect, happy communal society of peace, joy and good comradely fellowship, with happy workers and peasants basking in the sun? I guess we’ll all have to stay tuned for developments…