China’s credit bubble is starting to cause capital outflows to accelerate and may ultimately lead to weakness in the renminbi, prominent hedge fund manager and short-seller Jim Chanos warned.
Speaking at a Reuters summit on Tuesday, Chanos pointed to overbuilding in residential housing in China as evidence that the bubble is getting worse.
He believes investors are starting to take notice.
“It’s safe to say it’s accelerating,” said Chanos, speaking of capital flight out of China, and said China’s quarterly drop in foreign exchange reserves was “noticeable.”
Chanos, the founder of Kynikos Associates, estimated that China was building about 20 million condominiums each year while selling just 4 million to 5 million, a sign of overinvestment. He said he will advise investors to avoid Asian financial institutions, Reuters reported.
The hedge fund manager also said that he is betting against Macau, likening the activity there to the overbuilding in Las Vegas and noting that Macau businesses were putting up more capital than ever for less in return.
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