Famous hedge-fund manager Jim Chanos of Kynikos Associates suggests that China could be the next Greece, and in the next few years its debt woes may even exceed the European country’s, MarketWatch reports.
His full interview will be broadcasted on Sunday on Wall Street Week.
“I joke to my Chinese friends, somewhat half-seriously, another three-four years they are going to be like my homeland Greece,” said Chanos who underlined China’s debt-to-GDP ratio of nearly 300% and projected that the ratio is likely to balloon to 400% over the next few years.
Chanos finds the main problem in the credit story. “China’s banking system is bloated and it’s basically taking on more and more leverage.”
He poured much criticism on China’s debt-fueled economic growth and has been sounding alarm bells of possible hard landing for the world’s second largest economy for several years. "Hard landing" can refer to a rapid economic slowdown which usually happens as a government’s central bank is attempting to tighten fiscal policy and battle inflation.
According to the data from the Wall Street Journal, in 2014, China’s total debt hit $28.2 trillion, equivalent to 280% of its gross domestic product.
Earlier this month, China's monitary policy makers trimmed interest rates to combat the economic slowdown, as businesses and governments struggled under heavy debt.
China’s GDP rose 7% in the first quarter, weakening from the 7.3% growth in the fourth quarter, the National Bureau of Statistics said in April.
