Hedge-funder Chanos predicts China’s collapse

James S. Chanos, one of America's foremost investors who built a multi-billion fortune foreseeing the collapse of Enron, believes he has identified the next big global conglomerate to fail: China.

Chanos is warning that China's hyperstimulated economy is headed for collapse - not the sustained growth most economists widely believe will help lift the global economy out of recession.

Chanos, 51, whose hedge fund Kynikos Associates, based in New York, has $6 billion under management, says China's surging property sector is bloated with speculative capital and looks like "Dubai times 1,000 — or worse."

"Bubbles are best identified by credit excesses, not valuation excesses," he told CNBC. "And there's no bigger credit excess than in China."

Seasoned China experts dismiss Chanos's concerns, offering that he only began studying China's economy last summer and may not have the depth of knowledge required to have such dire pronouncements taken seriously.

Of course, Chanos is not alone in believing China's stimulus package and aggressive bank lending are creating false demand that could later collapse. But his is one of the loudest voices to be saying it. "The Chinese," he warned recently, "are in danger of producing huge quantities of goods and products that they will be unable to sell."

Chanos says he found his defining philosophy in a book titled The Contrarian Investor. After Enron collapsed in 2001 he was summed to testify before Congress. His firm, he explained, looks for companies that appear to have overstated earnings, are victims of a flawed business plan or have engaged in "outright fraud".

Chanos is due to flesh out his ideas and concerns later this month in a speech at Oxford University. ·