Jim Chanos, an American hedge fund manager, is predicting the crash of China’s currently prosperous economy. He said that a recent visit to China by his investment team found signs of weakening, principally in real estate.
While China is being looked on as a “key driver” of global economic growth, Chanos states that the country may even surge into a depression. “The cracks are spreading in the facade,” he said.
For the last few months, China’s real estate market has been booming because investment options are limited in China, and many people buy property to preserve the value of money. Wealthy Chinese people are buying more than one property. Others are selling old property to buy new ones. The boom in the Chinese housing market has been boosting China’s economy. In 2010, residential property investments accounted for 6.1% of China’s GDP. Here, Chanos was able to predict the crash of China’s economy. Housing accounted for a large percentage of the United States’ GDP before the bubble burst in 2008. The recent visit to China by Chanos’ investment team already found signs of decrease in house sales.
The global economy crash of 2008 was triggered in the United States. It began with a boom in the housing market, and as real estate prices shot up, less and less people were able to afford houses. This resulted with the burst of the housing bubble and a deflation in stocks. The simultaneous withdrawal of investments from stock markets lead to the disastrous stock market crash.
The global economy crash of 2008 was triggered in the United States. It began with a boom in the housing market, and as real estate prices shot up, less and less people were able to afford houses. This resulted with the burst of the housing bubble and a deflation in stocks. The simultaneous withdrawal of investments from stock markets lead to the disastrous stock market crash.
Inflation has also been a big problem in China. People have been questioning the speed at which the Chinese government is slowing down inflation. Chanos said, “A lot of people are willing to say China will slow down. The really scary thing is if you do the numbers and they cut back on construction, it’s not a slowdown, and they go negative real fast.” Chanos expressed his belief that an excessively rapid slow down may cause a reverse in the economy. "The fact of the matter is if they hit the brakes really hard, the economy goes into reverse. It doesn't slow. Nobody will say that publicly because it's unbelievable. But it happens to be the way the numbers work."
SOURCES
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