Here’s how you know Chinese officials are freaked out about the bubble it’s got on its hands.
Official media sources are weighing in on the debate between Jim Rogers and Jim Chanos, and congratulating Rogers’s successful debunking of the bear case.
In this case, the media source is People’s Daily, the official newspaper of the Communist Party, which writes:
American investment guru Jim Rogers has debunked contrarian investor James S Chanos suggestions that China’s investment bubble may lead to a Dubai-style implosion.
Rogers said the Chinese economy is not in any imminent threat of collapse, and investors and companies are wise to stay involved with it.
“It is absurd to say China is in a bubble when the stock market is 50 to 60 per cent below its all-time high. If you have a bubble you have things going through the roof. You have everybody screaming fire every day,” he said.
That’s a quote Rogers had made before, and in itself it’s not a debunking, but OK.
The article does acknowledge Rogers’s view that inflation is in the offing:
Rogers believes that the inflation risk would be more acute in China as exchange controls would trap funds and restrict outflows.
“It (the money) has only so many places it can go. You cannot go and buy a house on the (French) Riviera. More and more overseas Chinese investors would want to keep their money in yuan, as they know it would appreciate later.
Refuting claims that interest rates would need to remain low to avert potential deflation, he said central banks would have to hike rates in order to keep their economies under control.
“Governments around the world are going deeper and deeper into debt and this has got to be financed. Someone will have to pay higher rates eventually, ” he said.
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