China's Economy May `Crash' Within a Year as Bubble Collapses, Faber Says

A file photograph shows Marc Faber, managing director of Marc Faber Ltd. and publisher of the Gloom, Boom and Doom Report, speaking during an interview in Hong Kong. Photographer: Scott Eells/Bloomberg

China’s economy will slow and possibly “crash” in the next nine to 12 months, Marc Faber, the publisher of the Gloom, Boom & Doom report, said.

“The signals are all there, the symptoms of a major bubble are all there,” Faber said in a Bloomberg Television interview from Hong Kong. “The Chinese economy is going to slow down regardless. It is more likely that we will even have a crash sometime in the next nine to 12 months.”

The Shanghai Composite Index has plunged 12 percent this year, the fourth-worst performer among 92 gauges tracked by Bloomberg globally, as the government stepped up measures to cool the property market and ordered banks to set aside more deposits as reserves.

The latest increase of bank reserve ratios came yesterday after earlier moves failed to halt a record surge in real estate prices. In March, prices rose 11.7 percent across 70 cities from a year earlier, the most since data began in 2005, while consumer prices rose 2.7 percent in February, the largest increase in 16 months.

The clampdown on property speculation may prompt investors to turn to the nation’s stock market, Faber said. Still, shares are “fully priced” and Chinese investors may instead become “big buyers” of gold, he said.

China’s markets are closed today for a holiday.

Faber, who joins hedge fund manager Jim Chanos and Harvard University’s Kenneth Rogoff in warning of a crash in China, said he “would rather stay away” from China and avoid industrial metals from copper to zinc as well as companies that are exposed to Chinese economic growth. He prefers wheat, corn, soybeans and other agricultural commodities.

The opening of the World Expo in Shanghai, China’s richest city, is “not a particularly good omen,” Faber said, drawing parallels with 1873 World Exhibition in Vienna, which coincided with a slump in stock markets and a depression in the 1870s.