Chanos, Bass and the China collapse chorus are wrong: Consultant
Z-Ben Advisors founder Peter Alexander said Friday it's time to strip out the emotion around China, particularly among a chorus forecasting the country's impending doom, which includes Jim Chanos and Kyle Bass.
Investors either herald China as the greatest next market or warn that it's on the verge of collapse, he said. But the reality is it's "an enormous market that has a huge amount of opportunity," he told CNBC's "Squawk Box."
Alexander said Chanos, founder of Kynikos Associates, was wrong in predicting that oversupply in the property market would take down the Chinese economy.
Alexander, who has lived in China for more than 20 years and consults global financial institutions on investing there, said Chinese property prices are up 70 percent in the aggregate since Chanos made his statement in 2010.
On Wednesday, Chanos told CNBC he remains pessimistic on China overall, saying it "is the gift that keeps on giving on the short side." He argued that China has started to re-inflate its real estate market.
To be sure, Chanos' bet that shares of Caterpillar would fall as China's growth slowed has paid off. Alexander said he gives Chanos credit for predicting the arc of the old economy but said the short-seller discounts the new economy.
The decline in Chinese GDP growth is by design as the country aims to transition from an export- and investment-led economy to one driven by consumer spending, he said.
The appreciation of the renminbi has also put Hayman Capital Management founder Kyle Bass' China short in doubt, he said.
Bass has devoted much of his fund to his theory that central bankers will have to dip into China's $3.3 trillion of foreign exchange reserves to recapitalize banks after an impending loss cycle. That would cause a significant depreciation in the value of the renminbi and disrupt the country's export-import industry, according to Bass.
Alexander noted that China has depreciated its currency to move it in a more market-oriented direction that better reflects its trade.
"We just think the longer-term trend is for an appreciating currency," he said. "Everybody up until a year and a half ago had said China was going to appreciate its currency 2 percent every year, and now they're saying, 'Oh, it's going to depreciate.' So which is it?"
China has recently made attempts to move money off banks' balance sheets and create a substantial fixed income market, Alexander said. Already, that market is the third largest in the world at $7 trillion, something to which few investors pay much attention, he added.
"You're talking unhedged returns of 3 percent, 3.5 percent, maybe even a bit more, on very high-quality debt," he said. "Now, the world is looking not only for yield but trying to get out of negative returns, right? So the opportunity exists."