China Hard Landing Possible; Impact ‘Devastating’: Faber

CNBC,

Friday, 2 Dec 2011 | 2:14 AM ET

A hard landing for China will have a major negative impact on global commodities and risk currencies, says Marc Faber, the editor of The Gloom, Boom & Doom report, who adds that he is more worried about a Chinese economic downturn than a recession in Europe.

Faber, whose investment portfolio is concentrated in Asia, believes a Chinese slowdown is already under way.

"The (Chinese) economy consists of many sectors and I think some sectors are already probably in a recession," Faber said to CNBC on Friday in a phone interview. "I think growth will be much lower and it is possible that we could have a hard landing with no growth at all."

Faber, who correctly predicted the 1987 stock market crash and more recently forecast the stock market correction in August, says China's economy depends largely on capital spending, which tends to be volatile and has a strong multiplier effect on the economy.

While a recession in Europe could mean a gross domestic production contraction of 1-2 percent, he expects a shrinking Chinese economy to have a more widespread impact globally.

The commodities market, in particular, will bear the brunt of a China economic deceleration, said Faber. "If the Chinese economy grows at 10 percent, or 5 percent or no growth, it has a huge impact on iron ore, copper, nickel, anything. “

"It will have on the global economy a devastating impact via the resource producers of the world, whether it's Brazil or Australia or the Middle East or Africa," Faber added.

When asked about investor Jim Rogers' view that commodities will continue to do well in the long-run, in spite of a China slowdown, Faber said: "If I was always bullish about commodities and completely missed out on the crash in 2008, then obviously, having tied essentially my reputation to commodities, I'd continue to be bullish." Read Rogers' rebuttal here.

Still, Faber says gold [XAU=  1744.6899    0.95  (+0.05%)   ] should get some support over the near-to-medium term as he expects central banks in Europe and the U.S. to print more money to prop up their economies. As such, he advises investors to steer clear of the Australian dollar [AUD=  1.0215    -0.0027  (-0.26%)   ], the Canadian dollar [CAD=  1.0181    0.0043  (+0.42%)   ] and resources stocks.

Faber says he is staying well diversified with his portfolio divided equally in four parts between gold, real estate, stocks, and cash and bonds. He adds that he is keeping cash on hand to scoop up assets should markets correct further.