Salient to Investors:

Jim Chanos at Kynikos Associates said:

  • He is unconvinced by China’s improving economic growth and is maintaining bearish bets on the nation’s banks.
  • If you grow new credit by 30 percent to 40 percent of GDP a year, it is not difficult to reach the government’s expansion target, but China will have a “credit event” in 5 years as the country fails to keep the same pace of loan growth.
  • The mining industry will face difficulties.
  • A transition to focusing on consumption will be problematic for the credit cycle. Even as the central government acknowledges the needs to curb debt, it is difficult to keep local authorities from boosting borrowing and investing in new projects.

China Beige Book Intl said the China economy decelerated this quarter, contrasting with official data showing a pickup: increases in business investment and real estate revenue slowed, while service industries picked up and employees became tougher to find.

Jim O’Neill said:

  • China’s economy will double in 5 years to $16 trillion and said China is deliberately slowing growth and is capable of bringing the housing market and lending under control.
  • He is slightly surprised that China has allowed the yuan to appreciate this year, which shows their commitment to moving away from reliance on exports to spur growth.
  • The mining industry faces difficulties.
  • A new China focusing on consumption will lead to investment opportunities.

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