Invest in China cautiously: Expert

Julian Robertson, founder of Tiger Global Management and newly-appointed chairman of private equity fund Forstmann Little, sees great potential in China but warns investors should proceed with caution.

"There are many businesses there outperforming but also just as many, if not more, complete frauds," Robertson told CNBC Thursday. "Look at Sino-forest." Hedge fund manager John Paulson lost USD 600 million on his investment in the Chinese paper maker. "The cost of borrowing in China is tremendously expensive and the possibilities of a short squeeze are enormous," Robertson said. "If you look at the identified frauds five or more years out, your thesis will probably have proven itself right. But in the near horizon, the stocks could still go up 200 to 300%." Elsewhere, Robertson is bearish on Europe and the US. "History shows us that when governments initially print excesses of money, it works well like in the example of the Weimar Republic, until stagflation kicks in, that is," Robertson said. "Then the worst occurs and we morph into a totalitarian society. I hope we don`t continue to just sit back and accept this and continue to print, print, print." Market volatility has Robertson "breathing hard and scared right now." Nonetheless, he is not a big fan of gold. "I`m sticking to my old system of buying the best companies and shorting the worst companies." Robertson`s Tiger Management returned 32% annually, between 1980 and 2000, before its eventual demise later that year. It provided funding for the well-known "Tiger Cub" investors that went on to launch their own slew of record-breaking funds. Robertson, 79, has taken on the role of chairman of private-equity shop Forstmann Little, after his close friend of decades, prominent financier Teddy Forstmann, passed away last month. Copyright 2011 cnbc.com