Marc Faber : I think to some extent, China is a bubble

Marc Faber I will be cautious about buying equity now

In an interview dated 19 February 2010 Jitendra Gupta of Business Standard asked Dr. Marc Faber the following questions (amongst others) regarding the so called Chinese Bubble and also how he sees the Indian Economy compared with that of China :

People are divided on whether China is a bubble or not. What are your thoughts?
I think to some extent, China is a bubble. Last year, total loans by Chinese banks increased by a quarter of the country’s gross domestic product. In addition, China has excess capacities across industries. Hence, I expect its economy to slow down considerably.

But, the bigger question is that, will it crash? To that my answer is, yes, that’s also possible. If you look at the economic history of the US from 1800 to 2000, they had lots of ups and downs caused by the financial crisis, Civil War, World War I, the Great Depression, and so on. I think there is a 99 per cent possibility that China will slow down considerably and a 30 per cent chance that it will crash.

If China slows, it will have a devastating impact on industrial commodity prices and on those who supply these.

What is your view on growth in India as compared to China. Which country holds more growth potential?
India’s long-term economic growth should be supported by its tremendously growing population. But, China is expected to slow down after the incredible economic growth it has registered in the last 25 years. Its 10 per cent GDP growth rate is not sustainable in the long run. India is yet to achieve long-set targets and, therefore, has a huge growth potential. For instance, infrastructure has not been put in place. Similarly, unlike China, the consumer market in India is not saturated.

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Dr. Marc Faber also known as Dr Doom is an investment adviser, investment analyst and fund manager author and publisher of the Gloom Boom & Doom Report ,and the author of "Tomorrows Gold" . Dr Faber is known for his contrarian investment approach. Dr Marc Faber is associated with a variety of funds and is a member of the Board of Directors of numerous companies.
In 1987 he warned his clients to cash out before Black Monday on Wall Street. He made them handsome profits by forecasting the burst in the Japanese Bubble in 1990. He correctly predicted the collapse in US gaming stocks in 1993; and he foresaw the Asia-Pacific financial crisis of 1997/98 and the resulting global volatility. Dr Doom motto is "Follow the course opposite to custom and you will almost be right"
Mr. Faber is also the author of several books, including Tomorrow’s Gold – Asia’s Age of Discovery, and is a director of Ivanhoe Mines Ltd. , a mining firm focused on the Asia Pacific region. He is also an adviser to a number of private investment funds.