China-Russia on Treadmill to Growth Crushing Chanos Bubble Bets

asiablues's picture

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Bonesetter Brown's picture

Any China permagrowth case must provide answers to two key questions:

What happens to FDI when Western economies go bust?

What happens to China's export growth when Western economies go bust?

It makes sense for the Chinese and the Russians to tie up economically, and it is more important for Russia than it is for the Chinese, but to suggest that this in anyway innoculates China from Western economic/financial contagion is a very big stretch.

Seer's picture

And what happens to China when it runs out of energy? (yes, it can be delayed, but the time horizon is much sooner than later)

verum quod lies's picture

China is an export dependent economy that pegs its currency to the USD. Culturally people are not suppose to complain, and especially they are not suppose to point out any faults of the family, country, party chairman of the week, etc. (they can and do point out others faults, just not the family or extended family), which is almost the opposite of the average American (ignore the MSM, which is acting Chinese on the economy because they are in the tank for Barry Soetoro and the current alien occupation government). Therefore, based on basic cultural inclinations alone, you would be a fool to think that Chinese numbers are less positively biased than say U.S. numbers (and, yes, I don't trust many U.S. ones). Also, as Rogoff and Reinhart suggest, be careful when exclaiming "this time is different"; but, given current debt and promised benefits loads of its primary customers (e.g., the U.S. , Russia, etc.), this time is not just different but seems downright unique for export dependent economies (and add to that the fact that trade wars are more likley than at any time in my memory; and that tends to hurt net exporters more than net importers, hence the reason why a net importer might do it in the first place). Furthermore, as stimulus ends, and it will end, certainly external demand will wane. Finally, how many empty buildings does a political commissar need (remember, government bureaucrats tend not to be the best allocators of capital)? Accept what was just written as truth for a moment, and ignore your personal feelings for a moment about the U.S., China, Russia, or any other country, and think like a true capitalist/Chanos: Is China and its stock market a short, a long, or a neutral? I would have to agree with Chanos, it is really a question of arguing over timing, and that is tricky with a macro type bet.


Seer's picture

All countries, including China, go through the normal up-and-down business cycle, which is nothing catastrophic as suggested by Mr. Chanos.

Assumes  that we're NOT in a greater cyclical cycle, that this isn't the tail end of the BIG cycle, the end of growth as we've known it.

The "new" business cycle is that of the slinky decending down stairs: there may appear to be up-trends, but these are only momentary, the trend is down (contraction).

Gordon Freeman's picture

Russia-China cooperation--one question:  what's in it for China?



Seer's picture

Russia + energy <-> China + products


BlingBlingBen's picture

This article is really bad... are hacks for the Chinese government writing this stuff?  I will take Chanos all the way to the bank.

AllSingingAllDancingCrapof theworld's picture


How long can China build skyscrapers at $10 billion a pop that sit empty for years on end, even in a population of 1.2 billion?

Not to mention those hundreds of millions of horny dudes who have nothing (and no one) to do because of the kill-girl-babies one-child policy?

Recipe for long term gotterdamerung.

tmosley's picture

How long?

As long as they have positive net savings.

Seer's picture

Yes, as an entire country.  Thanks for pointing out the realistic fundamentals: while govt types can alter the pace, they cannot alter the trajectory.

I would wager, however, that China's current surplus can't hold out for that long given its internal spending ("stimulus") and its voracious appetite for importing resources (energy being key).

Leo Kolivakis's picture

Prediction: Chanos will cover his positions faster than you can say "OPA!"

Howard_Beale's picture

Chanos could easily be early by a year or two but when the pay-off is big, you get in early. The first guy to bet against subprime started in 2005 and it took him some time to prove he was right. You have to stick to your guns if you really believe in a major play of this proportion and not sweat the short term gyrations.

Right or wrong, Chanos isn't going to step back from his position. Personally, I think he is right.

caconhma's picture

Communist China economic & political system is not perfect but it has a lot of room to grow before it growth will come to holt.

As for real estate, as I stated many times, even if 10% of China ~1B peasant population will move to cities in the next 5-10 years, the Chinese real estate bubble will not be a problem.

As for Russian corrupt leadership, China does "understand" their problems and will be ready to "accommodate" it.


Seer's picture

it has a lot of room to grow before it growth will come to holt.

Please do tell how you come to this conclussion.

steve from virginia's picture


"Russia is already China's largest trading partner,"

Wrong, the US is, with almost 7 times the gross exchange as the $60 suggested; it's not called 'Chimerica' for nothing.

"Elsewhere, among the established and generally considered “low risk” countries, national debt and deficit has reached an unsustainable level. The U.K, at 14.2%, and U.S. with 11.92%, now rank No. 8 and 14 respectively based on budget deficit percentage to GDP in 2010 by country.

Wrong, China has been and is the out and out greatest beneficiary of gross borrowing worldwide. Who would buy Chinese finished goods without cheap (Chinese) credit? The four- letter word that most accurately represents Chinese goods is, 'Junk'.. As credit becomes more expensive - because it is losing its purchasing parity with cash - Chinese junk is becoming harder to market. The outcome is a China trade deficit.

This article suggests that China perhaps has found a replacement sucker for the US.

"The World Bank last month raised its growth forecast for China this year to 9.5%, while Bank of America Merrill Lynch projected Russia, the world’s biggest energy supplier, is poised for a growth rate of 7% this year."

Chinese growth figures are flat- out lies. Why would the Russian figures be any different?

"It is quite understandable how Mr. Chanos may have some sense of anxiety, since his fund--Kynikos--is shorting mainly Chinese developers and construction suppliers as disclosed in his latest interview. These sectors probably have not shown as much downside as he’d envisioned, primarily due to promising economic data coming out of China."

Mr Chanos' biggest problem with shorting China will probably be actually collecting on his shorts. Good luck on ya, mate!

spyware-free's picture

I read it as

"China is already Russia's largest trading partner."

Unless asiablues corrected the article between the time when you read it and I did I suggest you rethink your post.

caconhma's picture

steve, you are incorrect.

To understand China, its domestic and geopolitical objectives, one must look at Stalin's Soviet Union back in 1930s. However, the present Chinese leaders are much more flexible an sophisticated than illiterate and dogmatic Soviet leadership back then.

Seer's picture

To "understand" the trajectory of ANY country you need to understand it's resources (energy being key).  The past was the past, and, as those prospectus statements say, not a guarantee of future results.

Kina's picture

There is always promising economic data coming out of China, and probably no less manipulated than the economic data coming out of the US.


I wouldn't write Chanos's bet off yet.


One thing about China is they understate problem issues by very large degree. If they even mention something as an issue it often indicates it is a major problem.


They have mentioned property bubbles and inflation.

Paladin en passant's picture

...and let us add local political-entity debt fueled by that property bubble, a bubble within a bubble.  A trillion or so of wealth going poof is meaningful, even to the Chinese.  In China you don't get to retire in style when you've made massive, embarrassing get executed.