George Soros has said the current China’s debt-fueled economy is similar to the U.S. economy before the financial crisis of 2007-08. According to George Soros, the recent credit growth in March should only be viewed as a warning that the economy of China is headed to a big problem that could affect the rest of the world. On March, the predicted new credit through a Bloomberg survey in China was 1.4 trillion yuan, but the new credit hit 2.34 trillion yuan exceeding the median forecast. According to Soros, this only means that China is focused on promoting growth and not controlling the level of debt.
This recent problem in China on http://www.georgesoros.com/essays/ is what made Soros make his opinion in an Asian Society event in New York that it resembles what happening during the financial crisis of 2007-08 in the U.S. The crisis was indeed fueled by credit growth which is the reason Soros believes it’s alarming to see China facing the same issues. After giving out his opinion, George Soros had been in a war of words with the Chinese government when he disclosed that he has placed a bet against Asian currencies because the recession of the China’s economy was unavoidable.
The Chinese government responded through China’s state-run Xinhua news agency and refuted the prediction by Soros saying that he has been making these predictions on http://www.investopedia.com/university/greatest/georgesoros.asp several times in the past. Soros is particularly concerned about the state of the banking systems in China where the banks have more loans than deposits. He believes that any troubles that will affect the asset side will eventually affect the liabilities side. The biggest threat at the moment is the fact that other banks will have to lend to each other, and this will add a source of instability and uncertainty.
Read more on NYTimes.com.
China’s government intervention has given investors a reliever, but the problem has deferred for one or two years since the credit market is still growing at an exponential rate. However, George Soros was confident about the Foreign Exchange policy in China. He said that China’s strategy to link its currency to a broad basket of currencies rather than the dollar was a positive move for promoting healthy development. With that move according to Soros, China’s currency stands firm to the threat of competitive devaluation.
Visit the site Open Society Foundations to know more about George Soros.
Soros is the current chairperson and founder of Soros Fund Management and the Open Society Foundations on http://www.forbes.com/profile/george-soros/. Born in Budapest in 1930, Soros settled in the U.S. where he accumulated a fortune through a firm he founded and managed. Soros also praised the cooperation between the U.S. and China as a good strategy for calming the market after the turmoil at the beginning of the year. Soros is particularly confident about the China’s service industry although the productivity increase is still slower than the manufacturing sector.
Read more about this: George Soros Says China is on the Verge of Economic Turmoil Based on Similarities with the U.S. Economy in 2007-08