About ten years ago I read a book about the Great Chinese Famine.

One story I remember is that the so-called scientists of the Communist regime claimed they had produced a new way to grow wheat so that it was much denser, both as a way to prove the superiority of the Communist system vs. Western capitalism, and as a way to head off any rumors of famine.

This wheat was so dense, the Chinese government claimed, one could stand on top of the wheat field without falling to the ground.

In the book was an old black and white photo of two Chinese children apparently doing just that: standing on top of a wheat field. But the caption explained that actually there was a step ladder underneath them placed there to produce the illusion.

I'm not trying to draw any parallels between the above story and the linked article, besides the fact that the latter made me remember the former.

It's hard to say whose economy is most like that wheat field these days.

"He even suspects that Beijing is cooking its books, faking, among other things, its eye-popping growth rates of more than 8 percent."

That's quite likely, actually, given the lack of transparency in Chinese internal politics and the lack of access of independent journalists to the relevant data.

So he goes short on China, so what. There are enough people in the prediction business that some of them will be right some of the time. When all of them are right all of the time it starts to get interesting, probably we'll see new economic theories.

Until then this guys guess is as good as the rest. Remember the story about the monkey and the dartboard vs the analysts.

http://www.investorhome.com/darts.htm

Analyzing economies as a whole is even more perilous and error prone.

China is probably together with India positioned to create internal growth more than other places on the planet, whether or not they will succeed is a question that nobody has the answer to yet.

So, to counter the contrarian investor I predict it will go the other way round, we'll see who is right.

But on the off chance that I am don't take that as anything other than luck.

You can get a hint of what is happening by looking at the countries around China. South Korea real estate prices are back up to where they were before the crash, Australia has had to raise interest rates to cool down their economy. There is even talk the Japan might be coming out of it's funk. With that type of growth China's books have to be pretty messy, but I don't think they are blowing smoke.

I have heard strong skepticism about official growth (and other) figures from China for a long time from folks in equity trading.

Still, betting against China will not be easy. Because foreigners are restricted from investing in stocks listed inside China, Mr. Chanos has said he is searching for other ways to make his bets, including focusing on construction- and infrastructure-related companies that sell cement, coal, steel and iron ore.

This seems completely wrong. Here's a large-volume and presumably shortable ETF with Chinese holdings:

http://finance.yahoo.com/q?s=FXI

If I remember, I'll try to put a short order on it in the morning to see if I'm right. Not sure how the Times and Chanos could say something so incorrect tho'.

I don't have a source for this on hand, but I've read that Kynikos' Associates' average annual performance is negative. Since they're net short equities, that's quite an accomplishment (it means that if, for example, you made leveraged investments in an index fund, and additional leveraged investments in Kynikos, you could end up with a higher annual return with lower risk).

But keep that in mind. The average result of a Chanos bet is that the entity in question goes up less than the rest of the market, not that it goes down.

The reality in china - there is a huge underemployed class of people. But real estate is still cheap. In Beijing, Shanghai, Shenzhen and some other countries, housing is expensive, but the rest of china is still cheap, even for locals. So I dont really see a bubble there.

Also, the government is pumping money into infrastructure - dams, roads, tollgates, hospitals. No matter what crashes, the infrastructure remains.

China will hit crisis like all economies do - but I do not think it will be in real estate.

So I guess most investors are predicting growth.

If most investors were predicting a crash, then the ones predicting growth would be contrarians, and you could write an article about them.

Doom and gloom always gets a higher page count, though.

I expected to see onion.com on the byline, not nytimes.com