There’s contrarian, and than there’s this: Kynikos Associates chief James Chanos thinks China—economic miracle and engine of the current global resurgence—is headed for a crash.
“Dubai times 1,000—or worse,” the noted short-seller predicted recently on CNBC.
“Bubbles are best identified by credit excesses, not valuation excess,” he said. “And there’s no bigger credit excess than in China.” Chanos adds, for good measure, that he believes much of China’s economic growth is illusory, the result of some fancy accounting engineering on the part of the Chinese government.
Chanos, who is set to set out his prediction of a China bust at a speech at the University of Oxford later this month, is going out on something of a limb with this prediction. Most experts and economists expect the country to continue growing this year, and many China bulls have called Chanos’ bearish call ill-informed.
But Chanos is no stranger to successful bets against companies and market segments on the brink of collapse: He’s profited handsomely from the demise of Enron, Tyco International, homebuilders and global banks. But even if he’s right about China, he may have a tough time putting his money where his mouth is.
China restricts foreigners from investing in Chinese-listed stocks. Chanos, who is said to have begun studying China over the summer, said he is trying to find a way to get around those restrictions, seeking other fora to bet against the country.