Is Jim Chanos All Wet on China?

Short seller Jim Chanos has attracted much attention lately by saying to all and sundry that he's betting against China. While I too tend to think China is overhyped, Chanos ups the ante by saying government-fed stimulus is resulting in a real estate bubble "Dubai times 1,000 or worse." In the op-ed pages of Forbes, Shaun Rein of the China Market Research Group pushes back against comparing China's supposed real-estate excesses with those in the US and the aforementioned Dubai. He even gets a line I really like about how the PRC "has not been run by Ayn-Rand-loving free marketers like Alan Greenspan."

Nevertheless, I must fault Rein on comparing the subprime mess too much with what's going on in China when it's more of commercial real-estate Chanos has raised issues about. Rein says:

The real estate business to be concerned about is commercial building. There has been way too much construction of large office towers, especially in Shanghai, which is gearing up for its World Expo this year. Too many gleaming skyscrapers sit empty of tenants. The glut of office space has already caused rental prices to drop in places like the Shanghai financial district, Pudong.

Too much leverage, not high prices, caused the problems with real estate in Dubai and the U.S. There just isn't that much leverage in China. So even if prices are too high, a drop of as much as 20% or 30% wouldn't cause anything like the tsunami that hit the American and Dubai markets.

We'll see if there's no China bubble.