Wednesday, March 31, 2010

Jim Chanos Is Wrong on China

By Eric Jackson, Senior Contributor

03/31/10 - 06:02 AM EDT

Stock quotes in this article: BACHY.PK , CICHY.PK

BEIJING (TheStreet) -- Short-seller Jim Chanos correctly saw Enron'sproblems before they engulfed the company. He's now making media appearances identifying China as his next short idea, specifically the Chinese commercial and residential property markets.

Chanos famously referred to these markets as "Dubai times 1,000," foreseeing a cascading effect of property developers defaults, non-performing bank loans, bank losses and reduced lending, a pullback in further development and jobs, and a sharp drop in demand for commodities.

Jim Chanos
Jim Chanos, founder and managing partner of Kynikos Associates.

In short, according to Chanos, China's property market -- supporting the Chinese economy, which is the last engine powering the global economy -- is about to melt down.

He's put his money where his investment thesis is by shorting internationally traded commodity and infrastructure companies and Hong Kong property developers with exposure to China.

According to a New York Times article from January, Chanos only started studying the China market last summer. He has apparently never visited the country and has joked on TV appearances that he will never be able to visit the country now that he's made such bearish pronouncements.

Instead, Chanos -- like a lot of other Western commentators -- bases his views on statistics and the opinions of other Western talking heads, many of whom also haven't been to China lately, if ever.

There's a Chinese saying: "If you visit my village in three months, you'll notice small changes; if you visit my village in six months, you'll notice big changes; if you visit my village in a year, you won't recognize my village." Chanos and other bears haven't even visited the village yet to kick the tires.


[This post is an excerpt of the full article, which is available on by clicking here. Free Site.]

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