China's economy would collapse?

Concerns about economic bubble that occurred in China sticking back. Marc Faber, Zurich University economics professor who is also an investment adviser and publisher of the report Gloom, Boom & Doom, predicted China's economy will slow down and eventually will crash or collapse within the next 9-12 months.

"Signals were already there, the symptoms of a large bubble of all is there," Faber said in an interview with Bloomberg in Hongkong. Throughout this year, the Shanghai Stock Exchange composite index has plunged 12 percent and become the fourth worst performing market in the world as the Government's efforts to accelerate China's policies to cool the property market and ordered banks to set aside a higher minimum reserve requirements.

Increase in bank reserve ratio was made yesterday (05/02/2010) after government efforts to restrain China's record property price increases failed. Last March, China's property prices rose 11.7 percent compared with same period last year in 70 cities scattered throughout the country. The increase in property prices this is the highest since the survey conducted in 2005.

Faber said the government's restrictions on the property sector would encourage investors turned to China's capital market. However, stock prices in China have reached their fair prices and possible investors will target the gold.

China's economy risks overheating

China in the manufacturing sector grew faster last April. Based on Purchasing and Logistics Managers Index, exports grew 29 percent in the first quarter of 2010, while inflation rose 2.7 percent in February 2010. The increase was the highest inflation in the last 16 months, increasing the risk of economic overheating in China.

One fund manager who reduce their investment portfolio in China is the Blackrock Inc shares. The reason is, they assess the economic growth of China has reached its peak. And Blackrock Investment Manager Representative Tubbs says, Blackrock Emerging Markets fund is also expanding the position of "underweight" against China when compared with the MSCI Emerging Markets index, ie to 7.5 percent from the previous 4.6 per cent at the end of March 2010.

Faber, as well as the investment manager Jim Chanos and Economics Professor Kenneth Rogoff of Harvard University, gave a warning to investors against the potential collapse of China's economy. He said, better stay away from China and avoid the metal industry from copper to zinc, as currently exposed to the growth of such metals producer by China's economic growth.

He prefers to commodities of wheat, soybeans and other agricultural commodities as an alternative investment. According to him, the opening of World Expo in Shanghai, the richest city in China-not a good sign. Faber exemplifies the world exhibition in Vienna in 1873 that coincide with the stock market collapse and economic depression in the 1870s.

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