Renowned short-seller Jim Chanos, who has been bearish on China's economy for several years, has a disturbing insight on China: “It’s worse than you think.”

“Whatever you might think, it's worse," he told CNBC.

He spoke as worries of a deepening China economic slowdown intensified on Friday after a private survey showed the factory sector shrank at its fastest rate in almost 6-1/2-years in August, hammering global stocks and commodity prices.

U.S. stocks dropped sharply for a second day following a sell-off in major indexes around the world on the growing evidence that China's economy is slowing. The Dow Jones industrial average fell 296 points, or 1.7 percent, to 16,694 as of midday Friday Eastern time.

Chanos did not classify the drop as a correction or a bear market. But he noted that the years long bull market in the U.S. shows that "we've gotten a little complacent."

Earlier Friday in China, the preliminary Caixin/Markit China Manufacturing Purchasing Managers' Index (PMI) stood at 47.1 in August, well below a Reuters poll median of 47.7 and down from July's final 47.8.

It was the worst reading since March 2009, in the depths of the global financial crisis, and the sixth straight one below the 50-point level, which separates growth in activity from contraction on a monthly basis.

"Uncertainty about China growth is now the main swing factor in markets," Tim Condon, an economist at ING Group in Singapore, told Reuters. "Today's data reinforced the doubts about global growth."

Chanos said the Chinese government's reaction to a stock spike, "panic responses" from investors and recent currency devaluation has "given investors pause."

"People are beginning to realize the Chinese government is not omnipotent and omniscient," he said. "In fact, like many of us, sometimes they don't have a clue."

(Newsmax Wires contributed to this report).

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