George Soros had warned investors against the China’s debt-fueled economy which resembles the U.S. in 2007-08 before the build-up led to the global financial crisis. The credit growth figures recorded in March according to George Soros is a warning sign. Soros revealed his prediction when he attended the Asia Society event in New York saying that China surpassed the projection estimated by Bloomberg that the credit growth would hit 1.4 trillion yuan but instead China’s new lending reached 2.34 trillion yuan. It is a clear signal that the government of China was only committed to growth and not controlling the level of debt.
Soros is an experienced manager of a successful hedge fund company who made his $24 billion fortune through savvy wagers on markets. Due to his statements on http://www.bloomberg.com/news/articles/2016-04-20/soros-says-china-s-debt-fueled-economy-resembles-u-s-in-2007-08 about the state of the China’s economy, he has been involved in a war of words with the Chinese government. Soros has revealed in the World Economic Forum that he has already placed a bet against the Asia currencies in the event China economy worsens and further devaluation of the currency. In response, the China’s state media Xinhua news agency countered the statement as an assertion without basis saying that George Soros had made similar predictions several times in the past.
Soros has added that the banking system of China has more loans than deposits and situation could get complicated because of the continued inter-bank lending thus becoming a source of uncertainty and instability. The recent intervention by the Chinese government on https://www.opensocietyfoundations.org/people/george-soros has controlled the problem at least for this year and probably next year, but the credit market is growing at an exponential rate.
Other people worried about the future of the China’s economy include Andrew Colquhoun, who said that everything driving the economic recovery in China could end up derailing it. According to Colquhoun, China could be adding a debt burden to an economy that is already unsustainable.
Read more: George Soros is Warning the Investors about the Similar Characteristics of China’s Debt-Fueled Economy and the U.S. Economy before 2007-08
George Soros and Colquhoun believe that it is better for China’s economy to slow down than the government trying to stabilize it. Whatever the government actions are right now are only making investors feel less confident in the government’s commitment to reforms. Soros was born in Budapest, Hungary and became famous when he broke the Bank of England in 1992 and made $1 billion with a bet that the UK would devalue its currency. Under his leadership, George Soros managed Soros Fund Management that posted average annual gains of about 20 percent from 1969 to 2011.
Soros is also the founder and chairperson of Open Society Foundation, a network of foundations in more than 100 countries committed to promoting the objective of accountable government, open society and a society where rights are respected. After being successful in the financial markets, Soros took the opportunity to give back to the society through the Open Society Foundation.