George Soros: Chinese Economy Is on the Brink
When Billionaire George Soros speaks up, everyone listens. And this time should be no different, as the legendary investor is warning that an economic collapse is coming.
Earlier this year, world markets dove on growing fears that China’s economy was slowing more than expected. However, in the past month, markets have reversed as some confidence has returned to the world’s second-largest economy.
George Soros now says China is facing a financial crisis similar to the one the U.S. experienced a few years ago. Soros added that China’s growth is being driven by debt, something that is unnervingly similar to the U.S. economy a decade ago before credit markets dried up and sparked a global recession. (Source: “Soros Says China’s Economy Looks Like the U.S. Before the Crisis,” Bloomberg, April 21, 2016.)
At an Asia Society event in New York last Wednesday, Soros warned that China’s March credit growth numbers were especially alarming. Last month, new credit issued in China was 2.34 trillion yuan ($362 billion). This was well ahead of the median analyst forecast of 1.4 trillion yuan. (Source: Ibid.)
The current state of China’s economy “eerily resembles what happened during the financial crisis in the U.S. in 2007-08, which was similarly fueled by credit growth,” Soros said. “Most of the money that banks are supplying is needed to keep bad debts and loss-making enterprises alive.” (Source: Ibid.)
This isn’t the first time this year that Soros has warned investors about China. In fact, he’s so bearish about China’s economy that’s he’s now betting against the country. Soros, known for having “broke the Bank of England” in 1992, revealed at the World Economic Forum in January that he’s shorting the Chinese yuan because an economic collapse in China is “practically unavoidable.” (Source: Ibid.)
China’s state-run media outlets have blamed Soros’ comments for lowering investor confidence in the country, which led to a sharp decline in markets earlier this year.
So what will happen if Soros is right and China’s economy pops? Well, we saw what happened to the global economy a few years ago.