From the outside, China may look like an unsustainable bullet train, ready to run off its track. But the reality, according to Bloomberg Television’s Adam Johnson, is something quite different.
Johnson, a former trader and portfolio manager, traveled to China with hedge fund manager David Stroud to review the country’s development. Stroud was ready to go short before the trip, according to Johnson, but changed his mind while he was there.
Johnson described an economic environment significantly different from that which most American investors are accustomed.
“In China, people are assets. The government is trying to maximise the efficiency of its assets,” he said.
Part of that aim for efficiency has been reflected in the country’s rapid real estate development. Johnson says it’s sustainable, because developers have a longer time horizon, and the government is willing to support them, with no sign of that stopping.
“How can you take a position if you haven’t experienced it for yourself?” Johnson said, suggesting that anyone making a bet on the country should go there first.
But it’s not all gleaming high speed rail stations and ghost cities. Part of China it still living in the past, according to Johnson. He described the agricultural situation in China, where in certain parts, cotton is picked by hand and fields are plowed by water buffalo.
“The degree of inefficiency is staggering,” he said.
In fact, one Chinese government official asked Johnson to introduce him to companies that could sell him tractors.
Whether or not you believe Johnson’s take, or prefer Chanos’ view, it’s worth checking out his video series titled “Behind the Wall” for Bloomberg Television. The first segment, on the country’s ghost cities, is included below. You can check out the second on the country’s consumers here and watch the rest on Bloomberg Television this week.
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