Being Bullish On China's Future Is Consistent with Bearishness on the Price of Its Stocks

In Is China the Next Enron, Tom Friedman responds to Jim Chanos, answers no and says:

First, a simple rule of investing that has always served me well: Never short a country with $2 trillion in foreign currency reserves.
Mr. Friedman goes on to rhapsodize about China's future.

But he misses Mr. Chanos' point. America had massive foreign reserves in the early 1930s (gold). Its longer-term future was bright. Not so the short-term investment horizon. Japan had massive foreign reserves in 1989. Its future appeared bright. Whoops!

In our more distant past, America in the 1800s was likely the greatest growth sustained growth story the world has ever seen, as massive population growth coincided with the Industrial Revolution. Yet repeated busts meant that foreign investors lost their shirts over and over again.

For a short-seller such as Mr. Chanos, timing is everything. For Mr. Friedman, the long view is bright.

Both may be correct.

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