China’s banks use gold as legal currency

Over the next five years, how is this going to play out, Dan Collins? Is there going to be a soft landing and the shorts are going to lose out on this particular bet? Or, is there something brewing that we should be worried about?

Collins: In my opinion, the shorts will absolutely lose. Many of them have been short two, three years already. If you go to individual companies, especially the reverse merger market in the US, an absolute place to play short.

But, if you’re looking at the total macroeconomic situation in China, there’s really not much reason to be bearish. And I’ll give you reasons. People talk housing bubble; yet 50 percent of the homes in China have been purchased cash up front. The other 50 percent have paid 30 percent down.

So, people look at a slight slowdown in China this year and they come up with all these doomsday scenarios. They forget last year we were growing 10 or 11 percent a year with inflation getting nearly out of control.

China put industrial loans here from five percent last year all the way up to 9 percent this year. So, you’re bound to get a slowdown, and it’s good that we got a slowdown in China this year.

But as we talk, you know, “ghost cities” is another topic which I find interesting. Americans like to comment on “ghost cities”. But in America, we haven’t built infrastructure in two generations. What do we know about infrastructure in China? These “ghost cities” really aren’t ghost cities.

Obviously, local governments in some areas like Ordos [City] up in the north may have built too much, but what happens is that these cities are all overcrowded. You have massive urbanization in China now.

In fact, the area where I’m in is an area called the New City. In 18 months, they’ve built 35 apartment blocks, office buildings, 10 skyscrapers, shopping malls, everything. And it’s done in 18 months. So, if you were to look at it, yeah, it looks like a ghost city. But if you wait a year and a half, two years, it’s filled up. And all the properties have been sold and there’s really no credit bubble to these properties in China. It’s very difficult to get loans in China.

Press TV: Why’s that?

Collins: Well, I’ll give you an example. On an industrial loan for your business, you have to sign over your deed to get a loan. And even that, they will come in and they will analyze your plans, assets, equipment, everything. They will only give you a loan up to 30 percent of what they value it at. So, China is not a credit heavy nation. It’s very conservative in terms of lending.

As I mentioned, the housing market is another good example. The housing market has basically stopped in terms of transactions. But the prices aren’t really dropping. The reason why transactions stopped is they literally tell people they’re not allowed to buy more than one house now. And if you’re not from Shanghai, you can’t buy a Shanghai apartment.

When you put in these kinds of draconian rules to stop people from buying houses, I don’t see this as a bear signal.

Press TV: Alright, well, we’re just about out of time. I just want to reiterate the highlight of this interview which is that a “fund manager in China caught defrauding investors of a billion dollars was put to death”. Bravo, China!

GMA/JR

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