In recent years China’s economy has been the envy of the world. It’s grown consistently and even amidst the global recession, China emerged as the savior of several Western economies, namely ours, by loaning America money and buying our debt.
But what is China has been cooking its books? What if it’s just another Enron, except on a much more massive scale?
From the Politico.com:
Chanos, a billionaire, is the founder of the investment firm Kynikos Associates and a famous short seller — an investor who scrutinizes companies looking for hidden flaws and then bets against those firms in the market.
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Chanos and the other bears point to several key pieces of evidence that China is heading for a crash.
First, they point to the enormous Chinese economic stimulus effort — with the government spending $900 billion to prop up a $4.3 trillion economy. “Yet China’s economy, for all the stimulus it has received in 11 months, is underperforming,” Gordon Chang, author of “The Coming Collapse of China,” wrote in Forbes at the end of October. “More important, it is unlikely that [third-quarter] expansion was anywhere near the claimed 8.9 percent.”
And some cause for concern with consumption data. For instance, automobiles:
Chang argues that inconsistencies in Chinese official statistics — like the surging numbers for car sales but flat statistics for gasoline consumption — indicate that the Chinese are simply cooking their books. He speculates that Chinese state-run companies are buying fleets of cars and simply storing them in giant parking lots in order to generate apparent growth.
Personally, I wouldn’t be surprised if this is true. You can never expect to trust a communist regime, even if it puts on capitalist dress.
A collapse in the Chinese economy would spell certain doom for the U.S. and many other economies. Who will rescue us then?
