Marc Faber sees something fishy about China's export numbers. Namely, the import numbers its trading partners report from the giant nation are quite a bit lower. On those grounds, Faber, author of the Gloom, Boom & Doom Report, sees measly 4% growth in China this year — even if it reports 7% to 7.5% growth as expected.
"Governments control basically the statistical offices, so they can show whatever they want," Faber said on a phone interview with Bloomberg TV on Monday. "As Stalin said, it's not important who votes but who counts the votes. And the government counts the statistics."
He continued: "There's lots of funny things that are happening in China. And when the whole thing unwinds it will be a disaster."
Here is a transcript of Faber's interview with Bloomberg TV:
TRISH REGAN: China's currency fell to an 11-month low after China's central bank doubled the yuan's daily trading range against the dollar. The decision to allow greater exchange rate fluctuations comes at a time when China's economy is showing some serious signs of losing momentum. The government is targeting a 7.5% growth rate. That's actually the slowest since 1990. But leave it to the author of Gloom, Boom and Doom, that report, to say that it will likely be a little more than half that. Marc Faber joining us right now on the phone.
Marc, always good to talk to you. Somewhat depressing at times, but … you're calling here for 4% growth out of China this year. Why?
MARC FABER: Well I think that we had a colossal credit bubble in China and that this credit bubble is now being gradually deflated and will bring about problems in the real estate market and among some major players in the commodity markets as well. So overall, if I look at export figures from China, and they are very closely correlated to overall economic growth, then there is a huge discrepancy between what China reports and what China's trading partners are reporting.
So if you look at the figures of China, exports are still growing. If you look at the trade figures China exports to Taiwan, so China records exports of so-and-so much. The Taiwan report imports from China at a much lower level. So which figures are more reliable? I think the figures of the trading partners of China are more reliable. And they would suggest that growth has slowed down considerably.
MATT MILLER: Hang on. So Marc, are you calling for a Chinese report of 4% or are you saying it's more realistic that we'll see 4% and the Chinese will come out with a report or their own numbers that are closer to the 7, 7.5 that's expected?
FABER: Governments will always publish the statistics that they wish to show irrespective whether that is in China or in other countries. Governments control basically the statistical offices, so they can show whatever they want. As Stalin said, it's not important who votes but who counts the votes. And the government counts the statistics.
REGAN: Yeah, and if you're China, you've got some muscle there to count what you want. But at the end of the day, investors, they have a tendency to see through these things. Marc Faber, do you believe investors are seeing through this? Have they discounted China enough in your view?
FABER: Look, the fact is simply that Chinese stocks have been just about the worst performing stocks since 2006. Now analysts will dismiss that and say everything is perfect in China, but the stock market does not seem to believe everything that the government is saying about the economy. And clearly there are strength signs in the Chinese economy. In particular, as I said, we have this huge explosion of debt. Debt as a percent of GDP has increased in the last five years by more than 50%. Total debt is now over 215% of GDP, and a lot of it is trade finance that is being rolled over.
In addition to that, there are lots of funny deals. A friend of mine who analyzes China very carefully, Simon Hunt, he pointed out that trade finance between one state-owned enterprise and a private company has amounted to over $5 trillion by continuing to roll over the same collateral several times. There's lots of funny things that are happening in China. And when the whole thing unwinds it will be a disaster.
