China – “Dubai times 1000 — or worse”

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Investors are bullish because China’s exports are recovering, says the new analysis. Meanwhile, celebrated short-seller Jim Chanos says China is going to blow up. It’s going to be “Dubai times 1,000,” he says.  Jim Rogers disagrees. He thinks Chanos hasn’t looked long enough or deeply enough into the China story. He thinks China is a buy. The debate between Chanos and Rogers is captured below:

BEIJING (Commodity Online): Is the Chinese economy is caught on the verge of a bubble? That is the heated discussion these days among global analysts, investing pundits, hedge fund managers and economic experts.

In the last two months, the booming gold price was the epicenter of another bubble debate with celebrated investors such as Jim Rogers, Jim Sinclair, Nouriel Roubini and Marc Faber passionately discussing their arguments and counter arguments on whether gold price was in a bubble or not.

China has, indeed, been the fastest growing economy in the 2000-2009 period. There has been a boom in commodities production and consumption in China. China has overtaken several countries including India, US, Australia and South Africa in the consumption and production of several commodities including base metals and bullion.

There has been a flood of bank lending in China that has been boosting the Chinese appetite for manufacturing, gold mining, agriculture, farming etc. But is it all over?

Will this economic boom in China end soon? Noted global hedge fund manager Jim Chanos says China is in a bubble that will burst soon. He says there are some serious problems with Chinese disbursement of bank lending.

Chanos says that China’s economy is overheated and thus will burst badly. According to him the Chinese economy is being over-stimulated by its stimulus program of $586 billion dollars. Most of this money is going into speculation and overproduction of goods that China will not be able to sell.

Chanos names this as: “Dubai times 1000 — or worse.” Saying that China is cooking its books, and faking its spectacular growth of more than 8%, Chanos has predicted: “Bubbles are best identified by credit excesses, not valuation excesses.”

Will the Chinese economy collapse the way Chanos is forecasting? Please note that Chanos is not a newcomer to the world of short selling. He accurately predicted the collapse of Enron and several other shaky companies over the past several years. He is one of a breed of “short sellers.”

But global commodities investing guru Jim Rogers has blasted Chanos for what he has said on China. Rogers, who has been passionately investing in China for the last few years, says that China is not in a bubble as Chanos has predicted. Rogers, who shifted his residence to Singapore two years back as he felt that Asian countries like China have huge investment potential, says that Chinese economy is on strong and sound foundations.

Rogers points out that Chanos may not know the fundamentals of the Chinese economy and the basics of ‘bubbles.’

Recently, Rogers had a war of words with Roubini on gold bubble. Roubini had predicted that gold price is sitting on a bubble and the ideal price for gold was around $1,000 per ounce. Roubini’s comments came as gold price zoomed to touch a historic record of $1,227 per ounce in November last year.

Rogers lambasted Roubini’s lack of fundamentals on gold and said that the yellow metal was set to cross $2,000 per ounce in the next decade.

Now that Jim Rogers and Jim Chanos are warring over the China bubble, who will be the winner in bubble forecasting game? Let us wait and watch for their next utterances.

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