China may have 'hard landing' amid credit bubble, Faber says

[ROME] The Chinese economy may be headed for a "hard landing" as borrowers are taking on record amounts of debt to repay interest on their existing obligations, said Marc Faber.

"We had a hard landing in the stock market already and we had a hard landing in commodities and we might have a hard landing in the economy," Mr Faber, the publisher of the Gloom, Boom & Doom Report, said in an interview with Bloomberg Television's Francine Lacqua on Wednesday.

"We have a colossal credit bubble in China."

After a 7 per cent selloff at the start of the year, China revived intervention to stop some of the world's biggest investors from fleeing its US$6.5 trillion stock market. State- controlled funds bought equities on Tuesday, according to people familiar with the matter. The securities regulator signaled a selling ban on major investors will remain in place beyond its scheduled Jan. 8 expiration, they said.

"How it will unwind, we don't know," Mr Faber said, adding that there might be a cut in investments in research and development. "It could also happen through significant weakness in the economy and some sectors of the economy in China, like steel production, they already have experienced hard landing. My sense: I would rather be overly cautious on China than overly optimistic."

After reviewing what he sees as the buildup of a global asset bubble, Mr Faber said: "I think that the next thing that will happen is that all the asset markets, like the Titanic, will crash."

BLOOMBERG