Faber: Only ‘Stupid Foreigners’ Buy Chinese Shares

Uber investor and Gloom, Boom and Doom editor Marc Faber says buying Chinese shares is a really dumb move.

"The problem is that the local Chinese are selling and buying properties in Vancouver and in Singapore. They are shifting money outside," Faber tells First Post.

"So, the insiders are selling and the stupid foreigners have been buying Chinese shares."

Marc Faber (Newsmax photo)

Don’t forget the Chinese invented paper; they are very good at printing money as well, Faber cautions. "Paul Krugman argues that the overall level of debt doesn’t matter because one man’s debt is another man’s asset," says Faber.

"But the problem arises when one man’s debt cannot be repaid. That is going to happen in China because the underground lending market is larger than people perceive."

According to Faber, a setback has already begun in China. "Small companies are finding it difficult to get credit, and in the underground market, the lending rates are over 60 percent," he says. "That tells you something."

Faber adds that, in China, the rate of cost increases is of the order of 10 to 15 percent a year. “Pork prices have doubled over the past 12 months; rice prices are up; energy prices are up,” he says. “I believe that China’s GDP figures are overstated."

The Washington Post reports that China’s official growth target this year is said to be about 7 percent, but growth of between 8 and 9 percent still seems likely, still well below the double-digit growth China enjoyed for most of the past two decades.