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Jim Chanos explains the most important asset class in the world

In terms of markets, China has been quiet so far in early 2018, but it still plays host to the most important asset class in the world.

Business Insider Senior Finance Correspondent Linette Lopez spoke with famed short seller Jim Chanos at the Nasdaq Market Site about the significance of China’s real estate market.

“It drives commodity markets. It drives China’s GDP,” Chanos said. “It certainly is the backbone of their banking system in terms of credit. So if you wanted to look at one asset class, you know, maybe the US Treasury market might be up there as well. But the Chinese real-estate market – residential real-estate market – is probably the most important market.” Following is a transcript of the video.

Linette Lopez: You once said that the single most important market in the world is the Chinese property market. China has been incredibly quiet in 2018. We didn’t see our normal China puking that we do every year at the beginning of the year. So what’s going on there? And is it still the most important market in the world?

Jim Chanos: I do think it’s the most important single asset class globally. Because residential real estate represents roughly half of China’s investment and investment represents roughly half its GDP – give or take. And so that means that the Chinese residential real estate is probably a quarter – roughly – of the Chinese economy – or almost $US3 trillion. $US3 trillion is 4% of global GDP for one asset class that I think most would realise is simply being bought for speculative purposes. They don’t need to build 20 million apartments a year, but they do. And in urban environments.

The amount of depreciation and net inflow to the cities, you know, means they have got to be building six or eight or nine million, not 20. So it really is the most important asset class. It drives commodity markets. It drives China’s GDP. It certainly is the backbone of their banking system in terms of credit. So if you wanted to look at one asset class, you know, maybe the US Treasury market might be up there as well. But the Chinese real-estate market – residential real-estate market – is probably the most important market.

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