Friday, December 10, 2010

[Video] CNBC - Jim Chanos Remains Bearish on China With some Compelling Statisticis

The man who cracked the nut that was Enron, hedge fund manager Jim Chanos, continues in his assertion than China remains a speeding car racing for the cliff.   He does state some very compelling statistics in this video, asserting that for all the Chinese exports we speak about - the GDP of China (whatever the true GDP is) is only 5% net exports.  Instead China is essentially one big construction company with 60% of the economy 'building stuff'.... and a lot of that stuff is completely unaffordable to the Chinese citizen.  An always fascinating subject as the world of the tier 1 vs tier 2 vs tier 3 cities are quite different.

He also believes due to the profit margins are too thin at Chinese exporters for China to raise the yuan exchange rate materially - although this would instantly raise the wealth of the Chinese as their purchasing power would surge.  (Jim sort of counter argues with himself here in my opinion - if exports are only 5% of GDP, I suppose it really doesn't matter if the thin razor margins get damaged because those factories have nothing to do with 95% of the economy?)

One area I differ from him is his view that any dramatic slowdown in China would affect the U.S. in only small proportion.  While perhaps true in an economic sense, in a market sense almost all current bull markets derive from China - our multinationals are generating huge demand and profits from China, almost every commodity on earth is moving based on how much China buys, and frankly China has a sphere of influence on the entire Asian region so if China slows it won't just be China it affects but hordes of 'emerging market' countries in the region who are now dependent on the country to export into.

Anyhow for now, just get your Yokou Dance on and we'll worry about it some other day.

11 minute video

[Jul 21, 2010: A Reader's Observations of China]
[Mar 4, 2010: Hugh Hendry Continues to Doubt China]
[Jan 8, 2010: Hedge Fund Manager Jim Chanos Continues to Sound the Warning on China]
[Nov 13, 2009: Ordos - China's Empty City]
 [Dec 16, 2009: CNBC Video - Hedge Fund Maven Jim Chanos on Autos, Banking, and China] 

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