China is currently experiencing a “Soviet-style 1930s purge” to consolidate power of leader Xi Jinping and four or five people are disappearing daily, many falling out of buildings, says Jim Chanos, founder of the hedge fund Kynikos Associates.

Jim Chanos

Jim Chanos says problems for China have doubled

Jim Chanos, who predicted a collapse of the Chinese “bubble” four years ago, said in a recent Charlie Rose interview on Bloomberg that the problems have only doubled. “The challenge in China is trying to figure out what is really happening beneath the gloss of government statistics,” he said. “China is the only major industrialized that knows its annualized GDP on January 1 of that same year.” This is because the GDP “is what they say it’s going to be,” Chanos said with a laugh.

Jim Chanos questioned China’s core economic model and re-iterated his call that their economic miracle will collapase.  In China “the minute you stick a shovel and the ground and put up a building or bridge that counts as GDP,” he said. “The problem with that model is once you finish building it you have to put up another one. Many of the buildings are still vacant and there are a lot of the buildings will never be economic.”

Jim Chanos: China is still a bifurcated economy

China is much less of an export economy than people think, Jim Chanos says, citing net exports that are only a couple percent of GDP, down from double digits four or five years ago. The reported GDP went from 11 and 12 percent to near 7 percent recently, and Chanos says China “is still a bifurcated economy between consumption and investment,” noting that it needs to be more consumption driven.

The problem is the power purge.  The purge extends to not only prominent people, but people below prominent, Chanos says, “and its having an impact on the economy. This is because a large percentage of high end luxury items were bought with dirty money” and many of these people are now being purged out of existence.

Chinese leader Xi Jinping,General Secretary of the Communist Party of China and Chairman of the Central Military Commission, is a lot like Russian President Vladimir Putin, Jim Chanos says, in that he  is authoritarian. While he is officially a communist, he is really a nationalist. “Two years ago we would have said he is first among equals. Now we just say he is first.”

“He is going to much more firm, much more aggressive and much more muscular in the way he looks at the world.”

Jim Chanos Talks China Woes With Charlie Rose