Andy Xie warns of China crash

By Wee Sui Lee

SINGAPORE (Reuters) - Morgan Stanley former star economist Andy Xie warned of an imminent stock market crash in China -- but still hopes to raise money to invest in the country.

Xie, who attracted a wide following while he was at Morgan Stanley (MS.N: Quote, Profile, Research) because of his often contrarian views on China's economy and stock markets, also warned that the global boom in equities would be over by 2008 and that this would coincide with a worldwide recession.

The recession would start from the United States and spiral down into Asia where exporters would be hit, Xie, 46, told Reuters in a telephone interview.

"I think it's going to be bust very soon," Xie said, adding that a combination of excess liquidity, rising inflation and rich valuations would result in a global crash soon.

"People will be surprised. When the end comes, it's going to be pretty bad," Xie added.

Despite his ultra-bearish view on the markets, Xie told Reuters that he plans to set up an "investment club" that would be open only to people he knows. The club would invest in unlisted firms, would have total funds of $200 to $300 million and would be focused solely on China.

"I'm going to be flexible -- mainly looking at early-stage companies that appeal to domestic demand," Xie said.

"I'm looking for backers who know me, so there's a trust element involved and that would make decisions much easier," he added. "I want to be backed by business people who can provide value-add. When they see somebody, or a story, they have an instinct that that's going to work."