Thursday, March 14, 2013

Dr. Gloom and Doom: Colossal Credit Bubble Next Big Risk

The next major risk for investors is China's "colossal credit bubble," Marc Faber, editor and publisher of The Gloom, Boom & Doom Report told CNBC on Thursday.

Many investors turned bearish on the world's second largest economy last year after China clocked some of its lowest growth numbers in more than a decade, but a rebound in the final quarter that coincided with the announcement of the new leadership changed that mood. An evidence of that change in sentiment was the benchmark Shanghai Composite Index that rallied close to15 percent in December.  But Faber warns that a mounting credit bubble in China remained a crucial risk for investors in the Asian powerhouse.

"Whether they [Chinese government] can ensure continuous growth will depend on reforms and how to deflate the colossal credit bubble we have in China. This is going to be a huge problem because we have so much underground credit, questionable loans outstanding and questionable investments," he said..

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