China, where the economy has expanded 10.1pc a year on average since 1978, is reminiscent of the housing market before credit default swaps allowed hedge funds to make bets against the entire market, according to Mr Zuckerman.
When China's growth will decelerate or come to an abrupt stop is probably the most critical question facing the world economy. But predictions of a hard landing on everything from bad loans to investment-led overheating or inflation has yet to derail the country's expansion.
This is because the government-controlled economy is insulated from speculators testing the true voracity of the market, claims Mr Zuckerman. "We need short sellers," he said.
"The problem with the housing bubble was that for a long time people couldn't bet against it. Credit default swaps gave hedge funds specific tools to short the entire market. That pricked the housing bubble.
"It is very difficult to make a direct bet against China. You can short property companies in Hong Kong but it is not the same thing. It is a candidate for the next catastrophe."
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AtW's comment: I think short selling should be allowed in China, on a simple condition - whoever does it must physically live there without right to leave the place for at least a year since short selling deal ends.
