Monday, February 13, 2012

Jim Rogers or Jim Chanos: which billionaire investor is right about China? - NASDAQ

Jim Rogers says that China will ease itself through rough economic times, much like it did in 2008. Jim Chanos sees the entire Chinese banking system as ready to collapse as it is built "on quicksand."  Who's right?

If the banking system goes down, China goes with it.  But Jim Rogers is no cock-eyed optimist, and he has long warned of a " hard landing " for countries such as the United States and Greece.

While growth in China is down, it was still 8.9% for the fourth quarter of 2011.  The IMF predicts  it will fall to 8.25% in 2012, but that's hardly a recession.  The country also has over trillions in foreign reserves and the highest savings rate in the world. Numbers like those cover up a lot of mistakes.

In disputes like these, it is best to turn to the economic principle of revealed preference.  For China, it is a basic question: are foreign firms still expanding in the country?

As pointed out in many articles on www.emergingmoney.com , hotel chains, auto makers, and retailers are all launching major development programs in China. The yuan is also being accepted more widely around the world, which not only demonstrates China's economic might, but will also give Beijing more latitude to deal with any financial crises.

Advantage: Rogers, at least for now.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.


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Jim Rogers

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