10 largest economies
He thinks the Chinese government is understating its inflation problem — thereby making its economy look stronger than it actually is.
"One of the things we’re pretty convinced of based on our analysis, is that inflation is under reported in China by as much as 4 to 5% a year," he told CNNMoney’s Poppy Harlow in an interview.
China’s official statistics office recently reported that the country’s inflation rate had risen to 4.5% for the 12 months ending in January.
Taming rapidly rising prices had previously been one of the country’s top priorities, but now as the inflation rate has fallen, many investors believe it opens the door for China’s central bank to shift to looser monetary policies.
The low benchmark rate the central bank set on deposits gives the commercial banks a very cheap source of funding.
Another probable outcome of the negative one year returns on bank deposits after 2003 is the huge rise in investment in residential property—“the biggest driver of economic growth in China over the last four or five years,” Lardy said.
The latest government data shows the Chinese economy grew at an 8.9% annual pace in the fourth quarter, only slightly weaker than the typical 9% to 10% growth rates it has seen over the last few years.
While economists are often skeptical of China’s government figures, Chanos estimates those numbers are way off.
"We are seeing rapid falloffs in demand in things like construction equipment, railway construction over there, housing sales — so lots of things are slowing down pretty quickly over there," he said.
Brad Thomson is a business journalist based in Melbourne, Australia. Brad has a passion for financial markets and breaking news stories and loves writing about business news, stock market, and economic opinions that matters most to its audience. Brad spends a lot of time discovering and researching latest financial markets and industry news stories in order to make sure the latest and greatest stories are brought to you first on BigBoardNews.com.
