Jim Chanos: Not Impressed By The Europeans, And Still Shorting China
28 October, 2011, 14:58. Posted by ZarathustraTags: Economy, Europe, Jim Chanos, Real Estate
Jim Chanos appeared on Bloomberg TV and talking about the European debt crisis and China. Similar to the view here, he is not impressed by the European solution so far, just as Wolfgang Münchau was not impressed, and I am not impressed. Of course, the current rally is not good for bears, but he also thinks that the latest solution has only solve the immediate crisis.
He is also not impressed about China bailing out Europe, as he pointed out that China was about to save Greece but they didn’t. And he rightly pointed out that China would do what is in their best interests. As I have pointed out, China’s accumulation of foreign exchange reserve is due to the fact that China has a trade policy and exchange rate policy which tries to keep the Chinese Yuan from rising too fast, and because of that China has persistent trade surplus. Chinese Yuan is not fully convertible on capital account, thus China is also having more capital inflow than outflow. To keep the exchange rate from rising too much, the People’s Bank of China has to issue new Chinese Yuan currencies in order to buy the foreign currencies people are selling to them. In Jim Chanos terms, the foreign exchange reserve of China has liabilities against it, the liabilities being Chinese Yuan currencies, and surprisingly most people actually forget that. Thus buying of European bonds should not be taken as Chinese helping the Europeans. In fact, they are just helping themselves.
Jim Chanos is still shorting China, and now China is on a “bigger and faster treadmill” to hell than ever, and the Chinese finally realise that “property prices can go down as well as up”. The property market slowdown has started, and it has just started, as he points out episodes of angry homeowners protesting and smashing property developers’ offices. And although Chinese banks are still reporting good profits, he is just as unimpressed as I am, as he takes the Chinese banks’ accounting with a large grain of salt.
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About Zarathustra
Zarathustra: Founder and Managing Editor of Also sprach Analyst. Once an analyst, now an investor and entrepreneur. Based in Hong Kong, but Londoner at heart.
