Jim Chanos gave his latest reasons for shorting China in a video interview with the FT’s John Authers.
Chanos pointed to preliminary data on 2010 accounts. “Fixed income investment is now a record 70% of the Chinese economy,” he says. Of this $3.5 trillion, Chanos says around $100 billion goes to high speed rail and similar low numbers for other celebrated infrastructure investments. Most of that money is locked up in real estate.
At the peak of the property bubble in the west, fixed asset investment did not pass the high teens.
This data also suggests that a consumer-led recovery in China is more of a myth than ever.
“The problem is that consumers are less and less of this economy as this property bubble has gone on and a large amount of consumption that the consumers are embarking on is real estate related, it’s furniture, it’s appliances, these sorts of things you buy when you’re buying a new house or condominium,” Chanos said. “Any time you try to take something that’s 70% of your economy and reign it in and transition history tells us that usually the risks are to the downside.”