Saturday, January 9, 2010

Is China due for a Crash?

James Chanos, the famous short-seller who made a bundle when Enron collapsed, is predicting that the Chinese economy is due for a big crash. "Dubai times 1000", he reportedly said.

I think that the Chinese economy is due for some big shocks; no economy can grow rapidly indefinitely, and the Chinese certainly have lots of problems that will have to be worked out. But that is different from thinking that the Chinese economy is a house of cards that will collapse. The Chinese are making great progress in education, technological research, transportation, power generation, and other real, long-term economic factors. The government may have overstated their growth, but that growth is real. I am certain that they are following Korea and Taiwan into the club of modern economies. Along the way they may endure a major recession or two, but I don't think the growth that has started there is going to stop any time soon.

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