Chanos Issues Dire Warning on Next Chinese Bubble
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Hedge fund giant Jim Chanos issued a dire warning about real estate in China Friday.
Chanos said China is in the "midst of the biggest real estate bubble in human history - Dubai in 2007 times 1,000."
The noted short-seller and manager of the largest short-fund, Kynikos Associates (assets of about $6 billion), recently made quotes to The Globe and Mail (TGM). Chanos is said to have been shorting China by the truckloads over the last several years, even as China has shown rapid expansion.
Why? Chanos points to expansion that is toorapid, evidenced by vacant condos, offices, and infrastructure. But he also contends the problem doesn't just lie in China: many Western companies such as building contractors and resource producers, have also been swept up in the bubble.
Chanos is also a fan of U.S.-listed Chinese companies, which simply buy up shells of existing U.S. companies in order to list on exchanges. Those companies have increasingly come under scrutiny: the U.S. Department of Justice has launched an investigation into the companies.
One of Chanos' analysts said China was to build 2.8 billion square meters of office space over the next few years. When converted to feet, that's about a five-by-five square foot space for every man, woman, and child in the country.
Chanos also said the value of China's housing real estate to GDP is about 325 percent, similar to Japan in 1989 and Ireland in 2007 - just before both of those bubbles broke.
China has also had to recently "cleanse and recapitalize" it's banks twice: once in 1999 and the other time in 2003. The loans were put into special vehicles, which then used tham as collateral in issuing long-term bonds.
The article is lengthy, and reads more like a mini-bio of Chanos, with just the ending and part of the start talking about China. You can read it here.
Chanos said China is in the "midst of the biggest real estate bubble in human history - Dubai in 2007 times 1,000."
The noted short-seller and manager of the largest short-fund, Kynikos Associates (assets of about $6 billion), recently made quotes to The Globe and Mail (TGM). Chanos is said to have been shorting China by the truckloads over the last several years, even as China has shown rapid expansion.
Why? Chanos points to expansion that is toorapid, evidenced by vacant condos, offices, and infrastructure. But he also contends the problem doesn't just lie in China: many Western companies such as building contractors and resource producers, have also been swept up in the bubble.
Chanos is also a fan of U.S.-listed Chinese companies, which simply buy up shells of existing U.S. companies in order to list on exchanges. Those companies have increasingly come under scrutiny: the U.S. Department of Justice has launched an investigation into the companies.
One of Chanos' analysts said China was to build 2.8 billion square meters of office space over the next few years. When converted to feet, that's about a five-by-five square foot space for every man, woman, and child in the country.
Chanos also said the value of China's housing real estate to GDP is about 325 percent, similar to Japan in 1989 and Ireland in 2007 - just before both of those bubbles broke.
China has also had to recently "cleanse and recapitalize" it's banks twice: once in 1999 and the other time in 2003. The loans were put into special vehicles, which then used tham as collateral in issuing long-term bonds.
The article is lengthy, and reads more like a mini-bio of Chanos, with just the ending and part of the start talking about China. You can read it here.
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