As a veteran short seller, Jim Chanos knows when something is a bad investment. Right now, that would be China. Being bearish on China is nothing new to Chanos—he has been a non-fan for a long time, especially about its over-built real estate.
The latest trigger for his China pessimism is the trouble with debt-laden Evergrande Group, whose Monday, helping drive down international markets. Evergrande, China’s second-largest property developer, is emblematic of a larger weakness in China, he indicated. Chanos told CNBC he was troubled that the iShares China Large-Cap ETF [exchange-traded fund] has dropped more than 12% over the past dozen years, but China’s economy has ballooned.
“It’s the only major market, as I keep pointing out, for the past 12 years that’s gone down, and over that time frame the Chinese economy has more than doubled. I mean, this has been a terrible place to keep your money as a Western investor, and I think it will continue to be,” Chanos said. “Shareholders and creditors are just not treated well in the Chinese economic model, and I think that will continue.”
The founder of investment firm Kynikos—meaning “cynic” in Greek—Associates, he gained fame for shorting Enron, a great call when the energy seller collapsed in December 2001 amid a welter of accounting fraud revelations.
Chanos has warned for more than a decade about a bubble in the Chinese real estate market. He said he does not have a bet against Evergrande, but he is short “a couple of the larger Chinese financial institutions with what we think are pretty bad loan books.” In addition, he said, “We also short a couple of the cross-border giant banks that trade in London, with very large Hong Kong and China property exposure.”