George Soros comparison of Chinese economy and that of the US in 2007-08

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, 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 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 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.

George Soros Is Predicting Another 2008 Type Meltdown In 2016

The stock market has been taking a beating in 2016. The first three weeks of January have not been good to investors, and if George Soros is right, 2016 will be a very difficult year for investors. George Soros the multi-billionaire and hedge fund manager recently told that China has some major adjustment issue to face, and Soros believes those issues are in crisis mode.

Soros said the Chinese issues are so disturbing that a replay of the 2008 crisis might develop in the global economic market. Mr. Soros went on to say that stock markets around the world are feeling the impact of these Chinese issues, and the Chinese government is making matters worse by the way they are trying to correct them.

What Mr. George Soros means is the central bank of China is playing with their currency, the yuan. The bank is lowering the value of the yuan against the dollar, and that is having an impact on the currency exchange as well as worldwide stock markets. China is trying to boost their export business by making their products cheaper. That may help increase the Chinese gross domestic product growth rate a little, but it is creating uncertainty as well as concerns for economists and the financial industry.

George Soros believes the Chinese financial debacle is just one debacle that will fuel a financial meltdown in 2016. He thinks the Ukraine-Russian situation is another factor in the meltdown. Soros shared those thoughts in a interview recently. According to Soros, the Ukraine is a new Ukraine that wants to be part of the European Union. Soros has a foundation in the Ukraine so he knows first-hand what the situation is in that part of the world. Soros has more than 20 foundations around the world. He is a humanitarian as well as an economic genius.

The European Union’s bickering about the migration crisis and Britain’s referendum to leave the European Union are two other factors that are contributing to the uneasiness in the world. Investors don’t know if there will be an EU six months from now, and they don’t know if Europe is going to be able to absorb all the migrants from the Middle East crisis. All of those issues are solvable, but Soros thinks they won’t be solved at the same time, especially the China situation.

Mr. Soros is advising investors to put their money in other securities until some of these issues play out, and investors around the world are listening to him. The gold and silver markets have come alive again and so has the bond market. Some investors say they will stay away from stocks until they hit rock bottom. That’s how experts like Soros work the stock market.