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Dr Doom: China heading for crisis more serious than US shutdown
by Emily Blewett on Oct 14, 2013 at 11:36
China’s debt is approaching critical levels and a crisis could unfold within a year, renowned investor Marc Faber told Citywire Global.
Rather than focusing on the spat between politicians over the US’s fiscal policies, people should be more concerned about developments in China, said Faber.
‘I am leaning towards the view that China is heading for a crisis. The question is whether they can postpone the problems with fiscal or monetary problems for a year or so,’ he said.
‘Maybe in China they can postpone a crisis for a while but when you look at the expansion of debt to GDP of 50% over the last couple of years, clearly that is not going to be sustainable for a long time.’
Faber estimates China to be growing at around 4% per annum, far below the 7.8% estimate of the Chinese authorities. If growth were to fall much below this, it would be more damaging to the global economy than the US government shutdown, he said.
'People are so concerned about the fiscal problems in the US but I think these are relatively minor compared to what would happen to the world if China had a crisis,' he said.
In early March this year, just before the sell-off of emerging market assets in the summer, Faber sold his exposure to Thai, Indonesian and Philippine stocks due to overvaluation on larger names that he held. He does not hold Chinese stocks directly but rather holds Macau or Hong Kong shares in order to ‘play China’.
Adding to Vietnam and Europe
In recent weeks, Faber added to Vietnamese stocks as another way to tap into regional growth that he says is ‘set to boom’ around one of Vietnam’s port cities, Da Nang.
‘Exports in Vietnam have outperformed any other economy in the region and if you look at flights to Da Nang they are increasing and I think the whole region around Da Nang is going to boom.’
‘I recently bought some shares and I had already bought real estate.’
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