Market Overview

Jim Chanos: Big Misconception That Chinese Government Can Do What It Wants

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This morning, Jim Chanos joined CNBC to discuss the Chinese market.

“There's this big misconception there that the Chinese government can do what it wants,” Chanos said, addressing a little-known challenge. “The Chinese banking system is expanding to do this.”

Chanos said that China's credit expansion is much worse than that of the United States. Construction currently makes up 70% of the Chinese economy. They're building 25 million new homes. At its peak in the U.S., construction only made up 16% of the economy.

“The real estate in China is approaching the scary numbers [that Japan and Ireland] saw,” Chanos said. “One of the fascinating things about Chinese market…there isn't much resale market. If you try to sell your condo China, you can't. Everyone wants new.”

When asked about the emptiness in China viewed from Google (NASDAQ: GOOG) Earth, Chanos said that he has not spent time on the ground in China. He also said that he thinks the idea of walking around in the environment that you invest in is overrated.

“I think a lot of people in China get bamboozled the other way,” he said. “They see lots of activity and think things are booming… But at the end of the day if there isn't any economic activity, you're going to have a problem, no matter how good it looks. People should spend more time studying the numbers.”

Finally, he said that the short side is for professionals. “It's a tough game for individuals for tax reasons and other reasons,” Chanos insists.

 

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