BT : Chinese bubble set to burst: Marc Faber

Business Times - 04 May 2010

Chinese bubble set to burst: Marc Faber

(HONG KONG) Investor Marc Faber said China's economy will slow and possibly 'crash' within a year as declines in stock and commodity prices signal the country'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,' Mr Faber said. The opening of the World Expo in Shanghai 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,' Mr Faber, the publisher of the Gloom, Boom & Doom report, said in a Bloomberg Television interview in Hong Kong yesterday. '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 per cent yesterday, the most in two weeks, after the central bank raised reserve requirements for the third time this year.

The Shanghai Composite has slumped 12 per cent 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 were shut for a holiday yesterday.

Mr 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, Mr Chanos said last month. As much as 60 per cent of the country's gross domestic product relies on construction, he said. Mr Rogoff said in February a debt-fuelled bubble in China may trigger a regional recession within a decade.

Shanghai is projecting as many as 70 million visitors to the US$44 billion World Expo, more than 10 times the number who travelled to the 2008 Beijing Olympics. More than 433,000 people visited the expo on its first weekend. -- Bloomberg

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