The Chinese economy is in a recession and could be on the verge of an economic collapse in spite of the cheerleading from authorities. At least, that’s the opinion of renowned market analyst Marc Faber.
“Have you ever seen a government that doesn’t lie? I haven’t,” the editor and publisher of the Gloom, Doom, & Boom Report said during a discussion on the latest move by the Chinese central bank in an interview with CNBC. (Source: CNBC, August 14, 2015.)
Faber downplayed the recent action by the Chinese central bank to devalue their currency, saying the Chinese economy has been slowing down for a long time.
“You have to look at the Chinese currency in the context of all other currencies.”
Unlike the U.S. dollar, most of the major currencies around the world have depreciated over the past year or so. Central banks try to keep their currencies cheap in order to boost their exports.
“The two or three percent devaluation of the yuan is completely meaningless.” Faber described the reality behind the current currency war: “The Chinese yuan has appreciated by 80% over the past two years against the yen.”
Faber criticized officials in China in overestimating the growth rate: “Chinese economy is much weaker than the consensus believes.” Mainstream media in China has repeatedly said that the world’s second-largest economy is growing at seven percent annually.
“Don’t forget the People’s Bank of China has said that they will have now a currency that will reflect more market forces. And that means that if the market forces are against the currency, then the currency will go down,” Faber added.
He concluded by saying that the global economy is slowing down and liquidity is tightening which has led to the rising U.S. dollar.