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[url="http://www.bloomberg.com/apps/news?pid=20601087&sid=aFaODIq8xczc&pos=6"]China May ‘Crash’ in Next 9 to 12 Months, Faber Says [/url]

May 3 (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.



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.

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Overheating Risks



Manufacturing expanded in China at a faster pace in April, according to the Federation of Logistics and Purchasing’s Purchasing Managers’ Index. Exports climbed 29 percent in the first quarter, while consumer prices rose 2.7 percent in February, the largest increase in 16 months, adding to overheating risks in the world’s fastest-growing major economy.



BlackRock Inc. is among money managers reducing their holdings on Chinese stocks on expectations that economic growth has peaked. The BlackRock Emerging Markets Fund has widened its “underweight” position for China versus the MSCI Emerging Markets Index to about 7.5 percent from 4.6 percent at the end of March, the fund’s London-based co-manager Dan Tubbs said.



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.