China’s economy will slow down “meaningfully” and may even be at risk of a “crash” because of the nation’s excess capacity and as loan growth slows, investor Marc Faber said.
China’s fragile economy may undermine industrial commodities in the “near term,” the publisher of the Gloom, Boom and Doom report said. Faber added that he’s pessimistic on the euro as a possible bailout of Greece by other European countries increases deficits in the region.
Gross domestic product expanded 10.7 percent in China last quarter from a year earlier, the fastest pace since 2007. Lending in January exceeded the total for the previous three months while property prices climbed the most in 21 months, even after the central bank raised banks’ reserve requirements last month, reports released today show.
“The economy, for sure, will slow down meaningfully this year,” Faber said in an interview with Bloomberg Television in Hong Kong. “It has the potential to crash because of the overcapacities that have developed, and when loan growth slows down, we don’t know how the economy will react.”
A possible crash in China’s economy will be “disastrous” for raw materials used in industrial production, Faber said. He instead favors commodities including wheat, corn and soybeans and also said he doesn’t see a “huge downside risk” for gold.
“Other commodities haven’t gone up yet, such as the grains,” Faber said. “It may take time until they start to go up substantially but if you have time, you should be long wheat, corn, soybeans or own a farm, which is one way to participate in future food price increases.”
in Bloomberg.com
Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world. Dr. Doom also trades currencies and commodity futures like Gold and Oil.
