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15 December 2011

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Harry

Thanks John. Jim says that one must remember that China's banks have liabilities against the foreign reserves ie bank deposits of exporters. Thus, its not as if the funds are actually available. What is your view on the debt at 200% of GDP - he states that this debt is at municipal and other levels, not the central government. This makes it as badly indebted as Japan and worse than Europe and the USA? I take your point re he has no serious understanding, I am trying to understand myself and you are well placed for these questions.

John Ross

Jim Chanos provides only anecdotal evidence, no systematic statistics, always an invalid method of argument, for real estate development. China's banks are owned by and therefore backed by the state which has no significant budget deficit and if required can easily refinance them - so far it is not necessary. So there is no serious risk to China's financial stability. He also confuses share prices, which are likely to remain weak in China, with the growth of the real economy - the two are statistically negatively correlated http://ablog.typepad.com/keytrendsinglobalisation/2011/12/statistical-data-shares.html. Also he does not note that China's finance available for investment, $3.1 trillion in 2010, is now almost twice that of the US.
In short he has no serious understanding of the real fundamentals of China's economy

Harry

What are your views on the (seemingly rational) comments made by Jim Chanos re empty real estate developments, weak balance sheets of developers, banks and (in total) China debt to GDP of more than 200%? These are short term views, whilst your's are longer term.

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John Ross

  • Is Senior Fellow at Chongyang Institute for Financial Studies, Renmin University of China

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