Chanos: China's Banking System is on 'Quicksand'
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Early Wednesday hedge fund giant Jim Chanos, of Kynikos Associates, sat for an interview on Bloomberg TV.
A known bear on China (Kynikos means 'cynic' in Greek), with specific emphasis on banks, Chanos recently made another visit to China, and said he came back "a little more bearish."
One fallacy Chanos points out is that China's government doesn't have lots of money like everyone thinks. Instead, banks and financials are sitting atop a large pile of paper -- bonds, notes, etc. -- which carry liabilities. This means that all the spending and expansion is being backed by very little.
On banks, Chanos said there was never a recapitalization of the institutions following more volatile economic times of 1999 and 2004 in China. Basically, he elaborates, China's entire banking system is "sitting on quicksand." He said he's still short Agriculture Bank of China.
In terms of volume, Chanos notes transactions in China, particularly in tier one through tier three cities, is continuing to decelerate, down about 40 to 50 percent since at least August.
Chanos contends credit is expected to grow to a range of 30 to 40 percent of GDP, a level much to high for sustainability.
A known bear on China (Kynikos means 'cynic' in Greek), with specific emphasis on banks, Chanos recently made another visit to China, and said he came back "a little more bearish."
One fallacy Chanos points out is that China's government doesn't have lots of money like everyone thinks. Instead, banks and financials are sitting atop a large pile of paper -- bonds, notes, etc. -- which carry liabilities. This means that all the spending and expansion is being backed by very little.
On banks, Chanos said there was never a recapitalization of the institutions following more volatile economic times of 1999 and 2004 in China. Basically, he elaborates, China's entire banking system is "sitting on quicksand." He said he's still short Agriculture Bank of China.
In terms of volume, Chanos notes transactions in China, particularly in tier one through tier three cities, is continuing to decelerate, down about 40 to 50 percent since at least August.
Chanos contends credit is expected to grow to a range of 30 to 40 percent of GDP, a level much to high for sustainability.
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