Jim Chanos Is Still Short Chinese Banks, Property Developers (Bloomberg Video 9/21/2011)

Source: Bloomberg
Jim Chanos, founder of hedge fund Kynikos Associates, told Bloomberg's Carol Massar yesterday that he's still very bearish on China's property market and banking sector. He's been bearish on China for a few years now and now it's starting to move his way. The question now is, does China see a soft or hard landing? Chinese equity indices are breaking down as we speak and China's 5Y CDS (credit default swap) just made a new high. More on that in my next post. Here are a few (unofficial) quotes from the video (w/ links to related posts). Watch the Bloomberg video after the break.

Jim Chanos: "Well, the Chinese government balance sheet directly does not have a lot of debt, it's de minimis. But the fact of the matter is, the state owned enterprises and the local governments, and all the other ancillary borrowing vehicles, have lots of debt, and it's growing at a very very fast rate. And the assumption is, is the state stands behind all this debt. Well if we look at it on that basis, and Fitch and others have done so too, we see that debt in China, implicitly backed by the Chinese government, probably has gone up from somewhere about 100% of GDP to about 200% of GDP recently. And those are numbers that are staggering. Those are European kind of numbers, if not worse."

Bloomberg's Carol Massar: ...."I think we all think of it (China) as being so strong financially and fiscally, and yet numbers show a different story."

Jim Chanos: "Well, I think that's going to be the surprise going into the end of this year and into 2012 that it's not so strong. As I said, the property market is hitting the wall right now, and things are decelerating. The CEO Kumatsu said just last week that he's having trouble getting paid for his excavator sales in China. So, developers are being squeezed, they're turning to the black market for lending, this sort of shadow banking system that is growing at leaps and bounds....., and regulators over there are really trying to get their hands around the problem. Meantime, the local governments have every incentive to just keep the game going. So they are just continuing with with projects, continuing to borrow, as the central government tries to reign them in.

"We are short Chinese banks, the property developers, commodity companies that sell into China; anything related to property there is still a short."

See the full 15 minute interview at Bloomberg.com, where he talks about the European debt crisis and the U.S economy.