Marc Faber: China’s Numbers are Fake

Late last year, I anticipated that the global slowdown would bring China’s GDP growth down to 2%, a level that would make most nations envious but which would have been catastrophic for China.  In the end, robust government stimulus has saved the day, as spending for infrastructure, commodities, and property has soared.  The 8% growth target seems likely to be met.

However, the malinvestment from excess lending has made China’s growth dynamic appear incredibly unbalanced as even China bull Stephen Roach opined yesterdayt.gif.  An asset bubble is forming there. And even though shares tumbled 5% earlier this week, the correction was rather brief as the market came roaring back the very next day.

Perhaps this unbalanced growth and asset bubble is just the price China must pay in order to wean itself from dependence on export to the West.  After all, the country is still growing 8% whereas the United States has been in a mild depression over the past nine months.

That may make for nice copy, but is it really true?  Is China making the transition?  Are they actually growing 8%?  Marc Faber doubts it.

China’s economy is growing at 2 percent, not the 7.8 percent its government claims, says economist Marc Faber, publisher of the Gloom, Boom and Doom report.

“The Chinese government is one of the few governments in the world that knows its GDP numbers three years in advance,” Faber told CNBC.

“I’d be a bit careful about China.”

A growing number of investors turned bullish on China after its markets began to rise last March, Faber notes, adding that it’s possible Chinese markets will continue to rise for a while.

“If you throw money at the system, lots of things go up in value — but maybe they go up for the wrong reasons. What disturbs me today … is that the lows in March and late last year, sentiment was incredibly bearish about everything.”

Now, Faber observes, “there’s this incredibly bullish sentiment when insiders are actually selling and the technical picture of the market doesn’t look that great.”

Faber believes the market faces headwinds because there’s a huge supply of available shares and a record number of new issues, which dampens share-price increases.

“My sense is that, near term, we could still have disappointments because now the mood is very optimistic. I don’t think we’ll make new market lows in Asia, but I do think we’ll have a meaningful correction.”

On Monday, China’s first initial public offering in nearly a year rose so high and so fast that regulators were forced to halt trading twice, The Washington Post reports. The Hang Seng index rose to double its low point last fall.

There is a lot to like about China. But, this all sounds very toppy to me. Caution is definitely warranted.


Faber: China Really Growing At 2 Percentt.gif – Money News

Originally published at Credit Writedowns and reproduced here with the author’s permission.