Often seen as a source of insight when it comes to all matters of finance, billionaire investor George Soros, has shard his prognosis for the Chinese economy and it doesn’t look good. In fact, Soros likens the current state of China’s economy to that of the United States just before the 2007-2008 credit crunch that kicked off a global recession that some countries are still dealing with to this day.
The credit growth of China on http://www.georgesoros.com/essays/ triggered this year so far is one of the more troubling signs for its future, Soros told attendees at an Asia Society function in New York earlier this month. The forecast for China’s economy was 1.4 trillion yuan, which would show a disregard for the nation’s debt and embracing growth as its focus, which isn’t surprising since growth has been at the center of their short-term prosperity in the recent past. However, an expansion in the economy by 2.34 trillion shows that the Chinese economy is growing to unstable proportions.
George Soros has pointed out that this pattern of growth, where banks supply more money than necessary, is the same blatant disregard for their responsibility towards their debt the US showed in 2008 that led to its recession. Banks across China have also been handing out loans liberally, both to traditional borrowers and even other banks, practices which has been tied again and again to the failing real estate market in the US.
Mirroring this trend affecting property values, major cities in China have seen a boost to the value of their homes, some rising as high as 62% in cost in the span of a year. This bubble is similar to the 2005-2006 real estate bubble in the US just before it burst. But this, Soros points out on http://www.investopedia.com/university/greatest/georgesoros.asp, may take years to manifest, which is why many speculators may not see the signs pointing towards trouble now.
But the Chinese government seems aware of the trouble they face, which would account for the increase in international borrowing as they attempt to stabilize their economy. Yet state-run news outlets have targeted George Soros as a source of concern that deserves to be discounted over his analysis. In addition to the governments avowed lack of concern, Qu Hongbin, who leads HSBC Holdings Plc economists, has committed to writing that China’s ability to manage its economy is sufficient, and those worrying about systemic risk are mistaken.
Read more: Soros Sees the Chinese Economy Headed Towards Crisis
And it is true that Soros has pointed to similar levels of collapse in the past, most notably in 2011 during the Greek debt crunch. While that did not have as significant an impact on Europe as Soros had claimed on http://www.forbes.com/profile/george-soros/, there is no doubt that the country of Greece has been fundamentally changed from where it was prior to that crunch.
Whatever the outcome, Soros is backing up his intuition with actions. Soros has made it public that he’s been betting against currencies all over Asia because of the effect China’s economy is having across the region, and there have yet to be reported downfalls to that method of investing.