In 2012, investors were generally bearish towards the second largest economy in the world after China published the most anemic macroeconomic data for the last decade. In the last quarter of last year, investor confidence returned amid economic recovery and the news of the election of a new administration in Beijing.
This mood can be illustrated by the strong performance of the Shanghai Composite Index, which won 15 percent in December.
Faber warned that the growing credit bubble in China remains a key risk for investors in the country.
"If the Chinese government can ensure growth depends on reform and how to solve the problem of colossal credit bubble in the country. There are incredibly large amount of loans to black, bad debts and doubtful investments, "he said.
Western rating agencies warn of rapid expansion of the underground lending market, which is poised to become a real threat to financial stability.
Fears of Faber coincide with the request in December warning from the World Bank (WB), according to which the Chinese economy risks overheating because loose monetary policies of Western central banks leads to hot capital inflows to the region. They are the reason for the excessive growth of credit and investment bubbles swelling, according to a study of the bank.
Recent data on Chinese exports, which exceeded market expectations are also cause for concern, according to Faber.
Data on Chinese exports in January revealed a growth of 21.8% yoy, while analysts expect it to reach 10.1%. However, the reliability of this statistic is questionable because of discrepancies with the customs declarations in neighboring countries, including South Korea and Taiwan.
Faber said he believed the growth of the Chinese economy will actually be much lower and that some sectors will even fall into recession.
"I think the economy has slowed considerably, but they will announce that they have achieved the planned 7.5 percent. Real growth will be much lower. If you look at the data that can be relied on to a greater extent as those in Korea, Japan and Taiwan, statistics from China fits into the equation, "he said.
"China's economy will slow, and some sectors will even fall into recession ... The question is what will happen next. I think China will grow, but the road will be difficult, "said Faber.
In 2012, China's economy grew by 7.8 percent. The government in Beijing has set a growth of 7.5% in 2013, although most analysts predict that the expansion will reach 8%.
Marc Faber is a great contrarian investor and publisher of the Gloom Boom & Doom Report. He is well known for his accurace predictions of stock market crashes and other correct calls on different investment assets.
