Monday, October 10, 2011

Conflicting Opinions on China's Economic Collapse

There's an interesting contradiction regarding China's potential economic woes in the Economist and the Wall Street Journal this week.

Over the weekend, I read the current edition of the Economist, including an article lauding noted hedge fund bear Jim Chanos' longtime short on China. He's reputed to be traveling to Hong Kong this month, his first trip ever, apparently, so close to China. In his piece, the Economist reporter cited several pundits who feel it's now rather risky to short Chinese investments, so heavy have been losses in some of their values. Apparently as much as 30%, with P/E ratios down to only 8 for some equities. According to the piece, anyone rushing to short Chinese assets now is rather late to the party.

Meanwhile, in this morning's edition of the Journal, the back page of the Money & Finance section cautions that it's much too early to short China!

That reporter cites the continuing movement of people from country to cities, and China's national balance sheet's ability to absorb all manner of defaulted municipal projects while still maintaining a debt/GDP ratios of well under 100%.

I have no idea who is more correct. But it's clear somebody's going to be wrong.

To me, the fascinating aspect to this story is that two major, respected business publications have taken very public, contrary stands on an economic story of substantial global import.

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