Taps Coogan – September 30th, 2022

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Legendary short seller and founder of Kynikos Associates, Jim Chanos – perhaps the last great short seller to have their reputation survive the Post-Global Financial Crisis world, recently spoke at CNBC’s Delivering Alpha to talk about one of his long-time concerns: China’s real-estate bubble. He warns that Chinese real-estate is the second most important global asset class after Treasuries and that its ungoing meltdown is not under control as many would like to believe.

Some excerpts from Jim Chanos:

“If whatever’s going on in the world, whether it be Russia-Ukraine or central banks losing control… weren’t happening right now, I think what would be happening in the Chinese real-estate market would be front and center for investors.”

“I have long said that Chinese apartment prices are, probably after Treasury bonds, the most important asset class in the world and they are declining. We are seeing a real real-estate problem in China over the past 18 months that the government doesn’t seem to have a handle on… Investment is still almost 50% of the Chinese economy and residential real-estate is almost half of that. So, residential real-estate is 20%-25% of the Chinese economy which is a stunningly large number. They are still building 15-20 million flats a year. The fact that there is a major meltdown occurring among the developers, both public and private over there, is a major story that is really kind of on the back pages of our financial press…”

“…Like Tokyo in the late 1980s, almost every large company in China has a real-estate development arm. It’s not just the developers. This is endemic to the whole economy there. We ignore it at our own peril. Realize how much of Asia is tied into China…”

“Capital going into China is just not treated well and particularly western capital… This has been going on for a long time, not just the last few years…”

We couldn’t agree more. Then there is the risk of a Chinese invasion of Taiwan, as the subsequent guest discusses.

There is more to the discussion so enjoy it above. 

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