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Marc Faber Says China Could Crash Within a Year

Economics / China Economy May 04, 2010 - 05:38 AM GMT

By: LewRockwell

Economics

Investor Marc Faber said China’s economy will slow and possibly “crash” within a year as declines in stock and commodity prices signal the nation’s property bubble is set to burst.


The Shanghai Composite Index has failed to regain its 2009 high while industrial commodities and shares of Australian resource exporters are acting “heavy,” Faber said. The opening of the World Expo in Shanghai last week is “not a particularly good omen,” he said, citing a property bust and depression that followed the 1873 World Exhibition in Vienna.

“The market is telling you that something is not quite right,” Faber, the publisher of the Gloom, Boom & Doom report, said in a Bloomberg Television interview in Hong Kong today. “The Chinese economy is going to slow down regardless. It is more likely that we will even have a crash sometime in the next nine to 12 months.”

An index tracking Chinese stocks traded in Hong Kong dropped 1.8 percent today, the most in two weeks, after the central bank raised reserve requirements for the third time this year. The Shanghai Composite has slumped 12 percent this year, Asia’s worst performer, as policy makers seek to rein in a lending boom that’s spurred record gains in property prices. China’s markets are shut for a holiday today.

Copper touched a seven-week low and BHP Billiton Ltd., the world’s biggest mining company, fell the most since February on concern spending in the world’s third-largest economy will slow and after Australia boosted taxes on commodities producers. Rio Tinto Ltd., the third-largest, slid as much as 6 percent.

Chanos, Rogoff

Faber joins hedge fund manager Jim Chanos and Harvard University’s Kenneth Rogoff in warning of a crash in China.

China is “on a treadmill to hell” because it’s hooked on property development for driving growth, Chanos said in an interview last month. As much as 60 percent of the country’s gross domestic product relies on construction, he said. Rogoff said in February a debt-fueled bubble in China may trigger a regional recession within a decade.

The government has banned loans for third homes and raised mortgage rates and down-payment requirements for second-home purchases. Prices rose 11.7 percent across 70 cities in March from a year earlier, the most since data began in 2005.

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Copyright © 2010 BusinessWeek

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    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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