Investment guru Marc Faber says there's a 30 percent chance that China's "soft landing" will turn into a crash-and-burn, taking most commodities with it.
“I think to some extent (China) is a bubble,” said Faber, the editor of "The Gloom Boom & Doom Report."
"Last year, total loans by banks have increased by a quarter of GDP. In addition to this they have large excess capacities across industrie,” he told the Smart Investor.
Faber says he expects the Chinese economy will slow down considerably.
“The bigger question is that, 'Will It Crash?'” he asks. “To that, my answer is: 'Yes, That Is Also Possible.'"
He thinks “there is 99 per cent possibility that China will slow down considerably and I would say there is 30 percent chance that it will crash.”
If growth in China slows down, it will have devastating impact on the industrial commodity prices and also on those who supply these commodities, Faber notes.
And though India's long-term economic growth should find supported in its huge and growing population, China’s really incredible economic growth during the last 25 years means the country will slow down.
“For China, 10 per cent economic growth rate is not sustainable in the long run,” he says.
Goldman Sachs chief economist Jim O’Neill says China may be poised to let its currency strengthen as much as 5 percent to slow its fast-growing economy.
“I have a strong opinion that they’re close to moving the exchange rate,” O’Neill told Bloomberg. “Something’s brewing. It could happen anytime.”
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