Monday, May 3, 2010

Marc Faber: China May ‘Crash’ in Next 9 to 12 Months

Money manager Marc Faber said China’s economy will slow and possibly “crash” within a year as declines in stock and commodity prices signal the nation’s property bubble is set to burst, reports Bloomberg.

The Shanghai Composite Index has failed to regain its 2009 high while industrial commodities and shares of Australian resource exporters are acting “heavy,” Faber said.

It's always tricky to predict the exact timing on these things, but ultimately Faber is correct. China's central bank has been pumping huge amounts of money (25% plus on an annualized basis) so there are serious distortions in the economy.

The recent weakness in China's stock market may indicate that the recent slowdown in Chinese money growth may be enough to take the entire thing down.


  1. So, Marc Faber agrees with Chanos? Also, if China has been pumping huge amounts of money into the economy and Jim Rogers is an Austrian, why does Jim Rogers disagree with Chanos?

  2. Peter Schiff is Austrian and disagrees with Chanos. Listen to this , starting from 52 min 20 sec.

    I am not sure how sound his economics is, though. He basically says house prices in China are just responding to high inflation done by China's central bank (in order to keep the peg with the dollar). But if the Chinese Central Bank really pursued such high inflationary policy, shouldn't this cause in China an artificial boom followed by a bust? How can he at the same time deny that a bust is close? Isn't he contradicting Austrian Business Cycle Theory?

    Suppose Schiff is wrong and that a bust is coming in China. Then the question is: given that we can't foresee _when_ the bust is coming (cannot time the market), should we sell our China stocks now, or should we stay in and wait until after the bust for the stock values to recover?