George Soros is an experienced financial and investment expert that has recently said the current economic situation of China resembles that of the United States right before the global recession of 2007-08. He has said that debts currently fuel the Chinese economy on http://www.georgesoros.com/the-life-of-george-soros/, and when the credit market seized, it led to the global recession. The global economies are facing an imminent crisis and investors need to be very cautious with the decisions they make.
The Chinese economy is struggling, and since it is one of the largest economies in the world, its problems will quickly affect other economies, especially those that trade with them heavily. One of the notable problems if their devaluated currency that is already transferring its problems to the rest of the world and shares a lot of similarities to the 2008 global recession.
George Soros says that the credit growth figures from the month of March are a warning sign. He said this in an Asian Society event that was held recently in New York. China is the world’s second-largest economy, and its March credit figures surpassed the median forecast that was given by Bloomberg survey. The survey had predicted a figure of 1.4 trillion Yuan, a figure that was exceeded by almost 1 trillion Yuan. According to Soros, this shows that the government is prioritizing growth and is not concerned by the growing debt figures.
When the world’s largest economy went into recession in 2007-2008, the economy on http://www.marketwatch.com/story/is-george-soros-right-about-the-coming-crash-in-china-2016-04-22 was being fueled by a growing credit growth. Banks were supplying money that was desperately needed to keep the bad debts and loss-making enterprises alive. George Soros said this while referring to the Chinese banking system. The Chinese banks have more loans than deposits, which is not something good. Besides, their banks not only have trouble on the assets side but also an increasing trouble when it comes to liabilities. What banks are now doing is lending each other, and that is an additional cause of uncertainty and instability. This is a problem that has been deferred and can be done for a year or two. However, for the case of China, it is growing at an alarming rate.
Read more: George Soros comparison of Chinese economy and that of the US in 2007-08
Another scenario that resembles the situation just before the global recession is the booming business in the real estate sector. This is partly because of the surge in new credit in the month of March on http://www.nybooks.com/contributors/george-soros/ that helped the economy gather pace and made the property sector experience a rebound. The prices of new homes in some of the biggest cities have risen by 62% over the past one year. This was the situation in the U.S. in 2005 and 2006 where the real estate business was in a bubble.