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Shares of the following companies had unusual moves in China trading. Stock symbols are in parentheses and prices are as of the 3 p.m. local time close.

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, fell 26.58 points, or 1 percent, to 2,709.95. The CSI 300 Index (SHSZ300) slumped 0.5 percent to 2,963.31.

Automakers: FAW Car Co. (000800 CH) slid 1.8 percent to 12.61 yuan, its lowest close since April 13, 2009. Beiqi Foton Motor Co. (600166 CH) sank 2.7 percent to 8.62 yuan, the lowest since July 8, 2010.

China’s auto sales may fall 10 percent in 2011 with the end of government stimulus policies and restrictions on car licenses, the China Automotive Technology & Research Center said yesterday. China’s domestic automakers will be hurt more by the slowdown given their products are aimed more at the mid- to low- end market segments, it said.

Coal producers: Yanzhou Coal Mining Co. (600188 CH) added 1.7 percent to 32.49 yuan, the biggest gain since May 17. Pingdingshan Tianan Coal Mining Co. (601666 CH) advanced 0.9 percent to 18.05 yuan. China’s coal stockpiles fell 6.9 percent at the end of April from the beginning of the year, the China National Coal Association said today.

PetroChina Co. Ltd. (601857 CH), the nation’s largest oil producer, climbed for a third day, rising 0.8 percent to 10.97 yuan. The company said parent China National Petroleum Corp. bought 31.1 million yuan-denominated shares, equal to a 0.017 percent stake, in the company on May 25, according to a statement to the Hong Kong Stock Exchange yesterday. CNPC owned about 86.3 percent of PetroChina after the purchase, according to the statement.

Shanghai AJ Corp. (600643) (600643 CH) plunged 7.6 percent to 9.88 yuan after resuming trade, the biggest decline since Nov. 12. The company cancelled a plan to acquire two developers, according to a statement to the Shanghai Stock Exchange today. The stock had been suspended from trading since May 2.

Wuhan Kaidi Electric Power Co. (000939 CH) plunged by the daily limit of 10 percent to 19.53 yuan, its biggest loss since Dec. 28. Kaidi announced a plan by its parent to cut its stake in the company by at least 5 percent in a statement to Shenzhen’s stock exchange yesterday.

China’s industrial companies’ profit- growth slowed after the government raised interest rates and curbed lending to rein in inflation and limit asset bubble risks.

Profit rose 29.7 percent in the first four months to 1.49 trillion yuan ($230 billion) from a year earlier, the National Bureau of Statistics said on its website today. That compared with a 32 percent gain in the first quarter of this year.

Premier Wen Jiabao is seeking to sustain growth in the world’s second-biggest economy to create jobs and maintain social stability while curbing inflation that has exceeded his target every month this year. The central bank has raised interest rates twice this year and the government has intensified its crack-down on speculation in the property market by introducing purchase limits in some cities.

“Profit growth is expected to slow because their revenue will not grow as fast as before as the economy cools down due to the tightening,” Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong, said before today’s release. “Manufactures will be facing higher costs of power as they have to generate electricity themselves due to the power shortage.”

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, dropped for a seventh day, falling 0.1 percent by the break at 11:30 a.m. local time. It has slid 4.4 percent this week.

Industrial companies’ sales increased 29.5 percent in the first four months of the year to 24 trillion yuan, according to the statistics bureau’s statement.

Profits rose 34 percent in the first two months of this year.

Consumer Prices

Consumer prices rose 5.3 percent in April, staying above 5 percent for the second straight month and exceeding the government’s target of 4 percent for 2011.

Industrial companies’ profit growth may decline even as profitability may improve because of the recent decline in commodity prices, Ping’an Securities Co. analyst, He Qingming, wrote in a May 23 report.

Aluminum Corp. of China Ltd., the nation’s largest producer of the metal, on April 21 reported a 47 percent drop in first- quarter profit on higher raw-material and fuel costs.

China’s Sinovel Wind Group Co., the largest wind-turbine maker in the world’s biggest wind energy market, on April 26 said profit growth slowed to 1 percent in the first quarter, compared with a 51 percent annual gain in 2010.

With inventory levels rebounding and input prices rising, industrial firms’ profit growth will be under pressure and is expected to grow about 23 percent for the whole year, CITIC Securities Co. said in an April 28 note to clients.

The monthly profit survey covers enterprises in all 31 provinces and municipalities, replacing the quarterly announcements made previously.

The statistics bureau this year changed the annual sales threshold for companies eligible for inclusion in the survey to 20 million yuan from 5 million yuan.

 

Shoppers walk through a busy retail street in Beijing on February 14, 2011.

May 25 -- Marc Faber, publisher of the Gloom, Boom & Doom report, talks about the outlook for China's economy. Faber also discusses the U.S. economy and budget deficit, and his investment strategy. He speaks with Carol Massar on Bloomberg Television's "Street Smart."

The historic Bund sits in the foreground with the Lujiazui financial district on the other side of the Huangpu river in Shanghai.

China ranks first among 22 emerging Asian economies as the country most likely to maintain steady and rapid growth over the next five years, according to the Bloomberg Economic Momentum Index for Developing Asia.

China scored 76.2 percent in a ranking of 16 areas including economic competition, education level, urban migration, high-technology exports and inflation that measure a country’s ability to continue delivering high growth. India was second with a score of 64.1 percent followed by Vietnam at 61.9 percent. Timor-Leste was last at 25.3 percent.

The index suggests China and India’s economic surge is durable and will likely continue to drive global growth as the U.S., Europe and Japan lag behind. China eclipsed Japan last year as the world’s second-largest economy.

“I am not surprised that China comes out on top on this metric, and China probably should be placed on top among emerging Asian economies,” said Victor Shih, a professor who studies China’s financial system at Northwestern University in Evanston, Illinois.

In the past 30 years, China’s economy has expanded on average by 10 percent a year as it overhauled state-owned companies and allowed more foreign investment. Among economies with annual gross domestic product above $1 trillion, India posted the second-highest growth rate after China last year, expanding by 8.2 percent in the last quarter of 2010.

The Organization for Economic Cooperation and Development forecasts U.S. economic growth of 2.6 percent this year, 2 percent for the eurozone and a 0.9 percent contraction for Japan.

China Shocks

Shih said the measure may overstate China’s rank relative to India’s and other countries, in part because Chinese official figures understate debt levels.

China could face economic and political shocks that would impact on its growth. Fitch Ratings said in March that China faced a 60 percent chance of a banking crisis by mid-2013 in the aftermath of record lending and surging property prices. Strikes, riots and protests are also on the rise, doubling in five years to 180,000 incidents last year, according to Sun Liping, a sociology professor at Beijing’s Tsinghua University.

The index put some countries with among the world’s highest growth rates in the past several decades, including Malaysia and Thailand, behind such countries as Vietnam, which ranked third, and Bangladesh, which ranked fifth.

Equity Markets

The index gives weightings of 10 percent each to four categories: the competitiveness of market structure, which rewards countries for having fewer big companies that dominate equity markets; the quality of the labor force, including education levels, the age of the work force, and the growth rate of scientific journal publications; gross national savings as a percentage of GDP; and the growth of high-technology exports.

A further 12 areas have 5 percent weightings, including growth in GDP per capita adjusted for the cost of living, growth in world share of GDP, stability of inflation rates, diversity of top trading partners, external and public debt burdens, lending costs, net foreign direct investment and deforestation. Four “cohesiveness factors” include ethnic and religious homogeneity, income equality, rates of urbanization and poverty reduction, and variation in the jobless rate.

 

Corriente Advisors LLC ’s Mark Hart said China may accept a currency devaluation as the “path of least resistance” as inflation undermines economic growth.

 

May 26 -- Brian Jackson, a Hong Kong-based strategist with Royal Bank of Canada, talks about the outlook for Asian financial markets and economies. Jackson also discusses Federal Reserve monetary policy. He speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia."

Corriente Advisors LLC’s Mark Hart, whose firm handed investors a six-fold gain betting against U.S. subprime mortgages, says he is wagering on a decline in the Chinese yuan.

Hart is shorting the currency by buying put options on the yuan, he told the audience yesterday at the 16th Annual Ira Sohn Investment Conference in New York. Hart, chairman of Fort Worth, Texas-based Corriente Advisors, said China’s growth has been fueled by a credit bubble, and that rising inflation will bring the boom to an end.

“There are lots of ways to play China, but this is the most mispriced,” Hart said of his purchase of puts, contracts that provide the right to sell a security or currency at a set price within a set period.

His views on China echo those of hedge-fund managers such as Jim Chanos, known for predicting Enron Corp.’s 2001 collapse, and Hugh Hendry of London’s Eclectica Asset Management LP, who are betting on a decline in the country’s real estate market and economy. Chanos said in an interview this week that he would short sell Chinese companies listed in the U.S. if it were feasible to borrow shares to open the bearish positions.

Chanos, who has been forecasting a Chinese housing crash since last year, said Chinese developers have too much land on their balance sheets, similar to the U.S. before its housing market tumbled in recent years. China’s economy expanded 10.3 percent in 2010 and the country has been aiming to curb climbing house prices.

‘Path of Least Resistance’

Chanos, the founder of New York’s Kynikos Associates LP, said the cost of betting against Chinese stocks is keeping him away. Renren Inc., a Beijing-based social-networking company that went public in the U.S. earlier this month, is among the most expensive U.S. equities to short. The stock is difficult to borrow with 72 percent of the lendable supply out on loan, according to Data Explorers, a New York-based research firm.

Hart said “misallocations” of capital led to “empty” cities in China after developers built too many properties.

“There are signs of a bubble in China everywhere,” he said, adding that a bust would be worse than the 1997 Asian currency crisis, when the Thai baht collapse roiled markets.

Hart, who profited last year betting against European sovereign debt, said China may accept a currency devaluation as the “path of least resistance” as inflation undermines economic growth. Consumer prices rose 5.3 percent in April from a year earlier, as higher wages and commodity costs added to price pressures. Non-food inflation held at 2.7 percent, the fastest pace in at least six years.

Yuan Reaches High

The Chinese inflation rate understates the increase in prices because the government subsidizes food, education and housing, Hart said.

China’s yuan advanced to a 17-year high in Shanghai today as the People’s Bank of China set the reference rate at the strongest level since July 2005. Twelve-month non-deliverable forwards gained 0.2 percent in Hong Kong, reflecting a 1.8 percent premium over the onshore spot rate, according to data compiled by Bloomberg.

In 2009, Hart’s firm started the Corriente China Opportunity Fund LP, which seeks to profit from an economic slowdown in China, including declines in the country’s currency against the U.S. dollar.

Shares of the following companies are having unusual moves in China trading. Stock symbols are in parentheses and prices are as of 10:52 a.m.

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, rose 10.2 points, or 0.4 percent, to 2,751.96. The CSI 300 Index (SHSZ300) added 0.3 percent to 2,997.79.

Pig faming companies: Hunan New Wellful Co. (600975 CH) jumped by the 10 percent daily limit to 11.20 yuan, the biggest gain since Jan. 28. Hunan Dakang Pasture Farming Co.(002505 CH) rose by the daily limit to 15.40 yuan. National Business Daily reported average live hog prices rose more than 50 percent for the week ended May 15 from a year earlier.

Anhui Conch Cement Co. (600585 CH), China’s biggest cement producer, climbed 1.4 percent to 34.84 yuan. Anhui Conch is BOC International’s top cement pick as the company will benefit most from increased construction of affordable housing in China. BOC also expects “strong support” for cement prices, helped by the potential easing of oversupply by 2013.

Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. (600111 CH) gained 1.5 percent to 71.05 yuan, a record high. The company will be one of two corporations designated by Baotou’s city government to set up a rare-earth exchange in the city, according to a Shanghai Stock Exchange filing yesterday.

PetroChina Co. (601857 CH) gained 0.9 percent to 10.94 yuan, the highest since May 20. Oil rose to a two-week high in New York on signs of increased U.S. fuel demand. The nation’s largest oil producer may also bid for a stake in China Asset Management Co., a wholly owned unit of Citic Securities Co. (600030 CH), 21st Century Business Herald reported today, citing an unidentified person familar with the situation. Citic advanced 2.9 percent to 12.59 yuan, the most since April 6.

Sinosteel Anhui Tianyuan Technology Co. (002057 CH) jumped 2.6 percent to 20.91 yuan, the highest since May 11. The company plans to raise as much as 250 million yuan in a private placement by selling up to 16 million shares, according to a statement to the Shenzhen Stock Exchange yesterday.

The euro strengthened the most in a week against the dollar and yen on speculation China will increase purchases of European bonds, boosting confidence the region will emerge from its sovereign-debt crisis.

The single currency gained against 11 of its 16 most-traded peers after the Financial Times reported that European Financial Stability Facility Chief Executive Officer Klaus Regling had said Asian investors, including China, may buy Portuguese bailout bonds when the EFSF begins selling in June. Australia’s dollar climbed after a report showed business investment increased more than economists forecast in the first quarter.

“Comments from the head of the EFSF that China was clearly interested in purchasing its bond issue next month is providing support for the euro,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney.

The euro rose to $1.4150 as of 12:50 p.m. in Tokyo from $1.4088 in New York yesterday. It dropped as low as $1.3970 on May 23, the least since March 17. The common currency advanced 0.4 percent to 115.87 yen. The dollar traded at 81.88 yen from 81.97 yen. Against the Swiss franc, the euro rose 0.3 percent to 1.2327, after yesterday dropping to a record low of 1.2271.

Asian investors, including the Chinese government, may comprise a “strong proportion” of the purchasers of Portuguese bailout bonds, the Financial Times cited Regling as saying to reporters yesterday. China was “clearly interested” Regling said, according to the paper.

Urged to Diversify

China is the world’s biggest holder of foreign exchange reserves and the largest overseas investor in U.S. debt with holdings at $1.145 trillion, according to Treasury data released this month. Officials including People’s Bank of China adviser Li Daokui have urged diversification of the nation’s currency reserves away from the U.S.

The euro was still 0.5 percent from a record low against the Swiss franc as European policy makers struggle to find a resolution to Greece’s deficit woes.

Greek debt maturities could be extended on a voluntary basis, European Union Economic and Monetary Affairs Commissioner Olli Rehn told the French newspaper Les Echos in an interview published yesterday.

Restructuring Greece’s debt “cannot, must not be the solution,” European Central Bank Executive Board Member Juergen Stark said in a speech in Berlin yesterday. Euro-area leaders should “please consider the consequences” of a restructuring, he said.

Capital Spending

“China’s interest is definitely a short-term positive,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second-largest lender. “The longer-term issue of a restructuring of some sort for Greece remains in the background and may be an obstacle to a longer-term rally in the euro.”

The euro dropped 1.9 percent over the past month, according to Bloomberg Correlation-Weighted Currency Indexes, which track 10 developed-nation currencies. The franc climbed 2.5 percent, the greenback gained 1.9 percent and the yen rose 1.5 percent.

Australian capital spending climbed 3.4 percent in the three months to March 31 from the fourth quarter, when it gained a revised 1.5 percent, the government statistics agency said today. The median forecast in a Bloomberg News survey of economists was for a 2.7 percent increase.

“Today’s stronger-than-expected capex data is very much the reason for the higher Aussie dollar bias,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Singapore. “The outlook is very bullish and I suspect that’s why the Aussie dollar continues to push higher on the back of that data. It’s a bit of a ‘risk-on’ day.”

South Korea’s won rebounded from a two-month low as consumer confidence improved and global stocks rose, encouraging investors to favor the nation’s higher-yielding assets.

The sentiment index rose to 104 in May from 100 in April, the Bank of Korea said today. A reading above 100 indicates optimists outnumber pessimists.

The won strengthened 0.9 percent to 1,091.25 per dollar. The currency reached 1,101.68 yesterday, the weakest level since March 31. The MSCI Asia Pacific Index of regional shares advanced 1.2 percent.

 

European Central Bank officials are scheduled to speak today after Christian Noyer, governor of the Banque De France, yesterday said an austerity program was the only solution for Greece.

 

May 20  -- Kathleen Brooks, research director at Forex.com, discusses the outlook for the euro and yen.

 

May 19 -- Martin Schulz, a senior economist at Fujitsu Research Institute in Tokyo, talks about the outlook for Japan's economy and currency. Japan’s economy shrank more than estimated in the first quarter after the March 11 earthquake and tsunami disrupted production and prompted consumers to cut back spending, sending the nation to its third recession in a decade.

 

May 23 -- Geoffrey Dennis, global emerging-markets strategist at Citigroup Inc., talks about the outlook for emerging-market equities this year, the U.S. dollar and inflation in Brazil and China.

 

May 23  -- Geoffrey Yu, a currency strategist at UBS AG, talks about the outlook for the dollar and Federal Reserve monetary policy. He also discusses the impact of the European debt crisis on the euro and his top trade.

The dollar and yen advanced against their major counterparts as Asian stocks slumped and commodities including oil declined, boosting demand for the safest assets.

The Dollar Index approached a seven-week high before U.S. reports tomorrow forecast to show the world’s largest economy is recovering at a faster pace and initial jobless claims decreased for a third week. The euro fell against the dollar amid concern Europe’s sovereign debt crisis will spread as policy makers disagree over how to solve Greece’s debt woes.

“The dollar is being bought as there is a risk-off move in the market with falling stocks,” said Takashi Kudo, senior manager of the foreign-exchange division support center in Tokyo at NTT SmartTrade Inc., a unit of Japan’s largest phone company.

The dollar rose to $1.4040 per euro as of 1:30 p.m. in Tokyo from $1.4100 in New York yesterday after reaching $1.3970 on May 23, the most since March 17. The greenback traded at 81.97 yen from 81.95 yesterday. Europe’s common currency fell to 115.09 yen from 115.56 yen.

The MSCI Asia Pacific index of stocks dropped 0.6 percent and crude oil fell 1 percent.

The U.S. economy grew at a 2.2 percent annual pace in the first quarter, up from the 1.8 percent initially projected, a Bloomberg News survey of economists showed before data tomorrow. Applications for unemployment benefits fell to 404,000 last week from 409,000 in the prior week, according to another Bloomberg survey before tomorrow’s report.

‘Exit Strategy’

Stronger economic indicators would support the U.S. dollar as the market begins to position for the end of the Federal Reserve’s bond-buying program in June, said Richard Grace, chief currency strategist and head of international economics at Commonwealth Bank of Australia, the nation’s largest lender.

“When economic data is coming out better than expected, the markets focus on the likelihood of the exit strategy,” Sydney-based Grace said. “That exit strategy means higher bond yields and a higher U.S. dollar.”

The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, climbed 0.3 percent to 76.169. It touched 76.366 on May 23, the highest level since April 1.

The euro weakened against 13 of its 16 major counterparts amid concern the sovereign-debt crisis in the trading bloc is deepening.

‘Horror Story’

Christian Noyer, a Governing Council member of the European Central Bank, yesterday ruled out a restructuring of Greece’s debt, calling it a “horror story” that would leave the nation shut out of financing for years. ECB Council Members Mario Draghi, Erkki Liikanen and Chief Economist Juergen Stark are set to speak today, along with German Chancellor Angela Merkel.

Some European Union officials have supported a so-called “reprofiling” of Greece’s debt, whereby its payback period could be lengthened and interest costs may be reduced. Moody’s Investors Service is “very likely” to class a reprofiling of Greek debt as a default, according to its EMEA Chief Credit Officer Alastair Wilson.

“The main concern still centers around Greece and potential contagion in its sovereign-debt crisis to Spain,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “The market will worry about further bad news over the weekend and will be increasingly cautious about the euro.”

Taiwan Shares

Taiwan’s dollar was within 0.3 percent of a one-month low against the U.S. currency after foreign funds trimmed holdings of the island’s stocks on concern a slowdown in China’s economy will hurt demand for exports.

Global investors sold $518 million more local shares than they bought in the first two days of this week, according to exchange data. A Chinese manufacturing index fell in May to its lowest level in 10 months, data compiled by HSBC Holdings Plc and Markit Economics showed on May 23.

“The worry that a China slowdown will affect Taiwan is definitely there,” said Henry Lin, a Taipei-based foreign- exchange trader at Taiwan Shin Kong Commercial Bank.

The Taiwan dollar traded at NT$28.934 against its U.S. counterpart from NT$28.930. The currency touched NT$29.020 yesterday, the weakest level since April 21.

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Shares of the following companies had unusual moves in China trading. Stock symbols are in parentheses as of 11:30 a.m. local-time break.

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, fell 6.54 points, or 0.2 percent, to 2,760.52. The CSI 300 Index (SHSZ300) declined 0.1 percent to 3,022.35.

Agricultural stocks: Heilongjiang Agriculture Co. (600598 CH) gained 2.2 percent to 13.87 yuan, set for its biggest advance in a week. Yuan Longping High-tech Agriculture Co. (000998 CH), a seed producer, added 2.1 percent to 27.03 yuan.

A worsening drought in south China may push up rice prices in the country, the National Business Daily reported today, citing an unidentified statistics official at Beijing Xinfadi Agricultural Product Center. Rainfall was small in Hunan and Jiangxi provinces, which produce half of the country’s early indica rice, it said.

Guangzhou Iron and Steel Co. (600894 CH) jumped 5.8 percent to 8.34 yuan, heading for its biggest gain since April 21. Baosteel Group Corp., which owns the steelmaker’s parent company, said it expects to get approval for a 10-million- metric-ton mill this year.

Haoxiangni Jujube Co. (002582 CH), China’s biggest manufacturer of jujube products, rose 1.9 percent to 52.75 yuan, set for a record close since its listing on May 20. Shenyin & Wanguo Securities Co. started covering the stock with a “buy” rating, citing lower valuations than the average among food companies and the prospects of “high” growth in the next few years. The brokerage set a seven-month share-price estimate of 69 yuan, Tong Xun, an analyst at Shenyin & Wanguo, wrote in a report today.

 

The China Huarong building stands in Beijing. Hedge-fund manager Jim Chanos has been predicting a housing crash in China since last year.

 

May 24  -- Jim Chanos, president and founder of Kynikos Associates LP, talks about his strategy for Chinese stocks listed in the U.S., the European debt crisis and China's real estate market.

James "Jim" Chanos, president and founder of Kynikos Associates LP.

Hedge-fund manager Jim Chanos said in March that a property bubble in China is “as big or bigger than what we saw in the West” when compared with the size of the economy.

Jim Chanos, the hedge-fund manager known for predicting Enron Corp.’s 2001 collapse, says he’d short sell Chinese companies listed in the U.S. if it were feasible to borrow shares to open the bearish positions.

The Bloomberg Chinese Reverse Mergers Index has plunged 41 percent since Nov. 8 amid speculation financial statements from companies such as China MediaExpress Holdings Inc. (CCME) can’t be trusted. The concern intensified this week after Longtop Financial Technologies Ltd. (LFT), whose initial public offering was underwritten by Goldman Sachs Group Inc. and Deutsche Bank AG, said its auditor quit because of false records.

“Almost all of them have odd looking financial statements,” Chanos, the president and founder of New York- based Kynikos Associates LP, said on Bloomberg Television yesterday. “We wish we could borrow almost all of them.”

The Securities and Exchange Commission began an investigation last year into the use of reverse takeovers, in which a closely held firm becomes public by purchasing a shell company that already trades. The cost to bet against the stocks is keeping Chanos away.

Renren Inc., a Beijing-based social-networking company that went public in the U.S. earlier this month, is among the most expensive U.S. equities to short. The stock is difficult to borrow with 72 percent of the lendable supply out on loan, according to Data Explorers, a New York-based research firm.

Lendable Supply

Short sellers have borrowed 96 percent of Beijing-based China Shen Zhou Mining & Resources Inc. (SHZ)’s lendable supply, meaning there is almost no equity available for short sellers to bet against. Its shares are also among the most expensive for short-sellers to borrow according to Data Explorers.

China MediaExpress, which began trading in the U.S. following a 2009 reverse takeover, has sunk 92 percent since Jan. 27. It’s being delisted from the Nasdaq Stock Market after auditor Deloitte Touche Tohmatsu said that it was “no longer able to rely on the representations of management.” China Shen Zhou has declined 59 percent since its Jan. 5 high after its chief financial officer resigned.

Longtop retreated 43 percent between April 4 and May 16, the last time it changed hands before trading was halted.

During yesterday’s interview, Chanos said investors concerned that U.S. technology stocks such as LinkedIn Corp. are overvalued should turn their attention to China.

The 53-year-old investor said his “dramatic” bet against Chinese real estate may not be sufficient. While LinkedIn, the first social-media company to go public in the U.S., traded as high as 31 times sales last week, overvaluation is more widespread in China, he said.

A Bubble

“The bubble is really on the other side of the world,” he said in New York. “What my team found, they actually came back saying we’re not bearish enough,” he said. “The signs of overcapacity were even much greater than their last visit, which was late last year, and increasingly the executives that they met with were sounding a little bit more uncomfortable about the current situation.”

Chanos said Chinese developers have too much land on their balance sheets, similar to the U.S. before its housing market tumbled. He has been forecasting a Chinese housing crash since last year. China’s economy expanded 10.3 percent in 2010 and the country has been aiming to curb climbing house prices.

“If you look at the balance sheets of the developers, you’d be hard-pressed to see how healthy they are because they’re all loaded up with land just as our developers were at the top of our market,” he said. “We’ve maintained our pretty much dramatic overweight in our Chinese shorts.”

Prices Rise

China’s home prices rose in 67 of 70 cities monitored by the government last month. While housing prices slowed in major cities, they increased at a faster pace in smaller ones, according to data on the statistics bureau’s website. The Chinese government said this month it will maintain property curbs after it raised the minimum down payment for second-home purchases this year and introduced residential taxes in Shanghai and Chongqing.

China has lifted reserve-ratio requirements for major banks 11 times since January 2010 and raised interest rates four times since October to restrain increases in asset prices, including real estate.

Chanos said in March that a property bubble in China is “as big or bigger than what we saw in the West” when compared with the size of the economy.

China’s benchmark stock index fell the most in four months, erasing this year’s gain, on concern government measures to tighten liquidity and the European debt crisis will slow growth in the world’s second-largest economy.

Jiangxi Copper Co. tumbled after a preliminary reading of a purchasing managers’ index showed China’s manufacturing may expand at a slower pace this month. PetroChina Co., the nation’s largest oil producer, sank to a six-month low as crude dropped after Fitch Ratings cut Greece by three grades. Poly Real Estate Group Co. paced declines by real-estate companies as the country’s money-market rate rose.

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, slid 83.89, or 2.9 percent, to 2,774.57 at the 3 p.m. local-time close, erasing this year’s advance of as much as 8.9 percent. Today’s decline was the largest since Jan. 17. The CSI 300 Index (SHSZ300) slumped 3.2 percent to 3,022.98.

“Europe’s debt crisis and signs of slowing economic growth in China have hurt investors’ sentiment,” said Luo Bin, general manager at Shanghai Mingyu Xiaoyang Investment Management Co., which manages the equivalent of $60 million. “We need to be cautious now and it may be still some way before the market has found its bottom.”

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