Marc Faber: You Believe in Father Christmas if You Believe China’s GDP Numbers

CHATTERLY: "Do you think the Chinese equity markets -- do you think that is an accident waiting to happen?"
FABER: "Well, yes and no. Every equity market is an accident waiting to happen because one day the bull market is over and then it's not going to be just a 5 percent correction. But I'd like to say this about China. First of all, it's a huge country. People don't realize but 1.3 billion people suddenly wake up and want to buy stocks and there's a lot of new accounts that are being opened. The market has been weak since 2007 and has under-performed the U.S. by something like 80 percent over that period of time. So the Chinese stocks became relatively inexpensive as of July of last year. Then the Asian fund managers and global managers looked around and they saw the Philippines is up, Thailand is up, Indonesia is up, India by then rallied already 30 percent, and the only market that was essentially depressed was China and to some extent Hong Kong. So money suddenly started to flow in although everybody knew that the economy was slowing down. My view was, yes, the economy -- by the way, you have to believe in father Christmas to believe that GDP in China grew by 7 percent this year."
CHATTERLY: "What is it really? Five percent?"
FABER: "The true growth is maximum, maximum 5 percent. I would say between 3 and 4."
CHATTERLY: "Now the problem with China and the rise in the equity markets is the fact that so far it's really just predicated on stimulus, nothing else really. The problem is we had some stimulus and it's not showing through in the economy. Here in the Euro zone we had stimulus and it is showing through in the economy. So for the stimulus -- it's not going to help."
FABER: "I agree with you, but we understand in Europe it's showing through after several years of very depressed economic activity. In China we had -- since essentially 2000 -- the economic boom and it was interrupted in 2008 and 2009 briefly, but then it bounced back very strongly driven by credit. Now the credit injections will not have an impact on real economic activity but they'll have an impact on the value of the Yuan, RMB, and on equity markets, because the money will flow somewhere. It won't flow into the housing market because that's yesterday's game. Home sales are down, prices are down, land sales are down. The money goes into some speculative activity. It doesn't flow to Macao at the moment, into the casinos, it flows into the stock market."
NN MALE HOST: "Let's touch on another major economy quickly in Asia, Japan. Has the stimulus measures there worked? The Yen has weaken significantly. Is the outlook better now?"
FABER: "Well, depends for what. stocks have gone up. The Yen has gone down. Real incomes are down because Japanese households they spend roughly 50 percent of their food on imported food so that has all become more expensive. So economically it hasn't lifted the standards of people, but what it is done,  it's lifted the profits of corporations. But I'd like to introduce one thought about Japan and this is the following. If someone tells you that the money printing will go. And you're Toyota, and you're about to invest say $10 billion in new plant and equipment. You know the Yen is going to go down. Where will you you rather build your plans? Overseas or in Japan? I think actually the policies are destructive for capital spending in Japan and encouraging capital spending outside Japan."
NN MALE HOST: "Places like southeast Asia."
FABER: "Yeah, southeast Asia, Mexico, the U.S. -- in states that are labor friendly and so forth.  But they are not going to build additional plant and equipment in Japan. Plus, Japan despite of the Yen weakness is still relatively expensive. It is not the bargain like Vietnam is or parts of China, or parts of India and so forth."