China’s debt-fuelled economy resembles situation in US ahead of financial crash, billionaire investor George Soros warns
Soros has clashed with Chinese government and state media before over his bleak assessments of the nation’s economy
Billionaire investor George Soros said China’s debt-fueled economy resembles the US in 2007-08, before credit markets seized up and spurred a global recession.
China’s March credit-growth figures should be viewed as a warning sign, Soros said at an Asia Society event in New York. The broadest measure of new credit in the world’s second-biggest economy was 2.34 trillion yuan (HK$2.8 trillion) last month, far exceeding the median forecast of 1.4 trillion yuan in a Bloomberg survey and signalling the government is prioritising growth over reining in debt.
Communist mouthpiece accuses billionaire investor George Soros of ‘declaring war against China’
What is happening in China “eerily resembles what happened during the financial crisis in the US 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.”
Soros, who built a US$24 billion fortune through savvy wagers on markets, has recently been involved in a war of words with the Chinese government. He said at the World Economic Forum in Davos in January that he has been betting against Asian currencies because a hard landing in China is “practically unavoidable”. China’s state-run Xinhua news agency rebutted his assertion in an editorial, saying that he has made the same prediction several times in the past.
Soros said China’s banking system has more loans than deposits and has “troubles on the assets side but also increasingly troubles on the liabilities side”.
“Other banks have to lend to each other and that’s an additional source of uncertainty and instability,” he said. “The problem has been deferred and it can be deferred for another year or two, but it’s growing, and growing at an exponential rate.”