Soros: ‘Very Cautious’ On China

27 Feb

International financier George Soros has confirmed concerns expressed by leading international economists on the possibility that the Chinese economy is in a “bubble”:

A hard landing for Chinese markets could come, Soros said, due to a significant increase in supply offset by falling demand. China’s regulatory authorities have managed the situation well thus far, he said, but he’s concerned about how various countries are maneuvering in the face of global imbalances…

I’m very cautious, until the economy cools off a little“…

“The overheating, the inflation, the harsh policy tightening is happening right now and it will continue to happen until the economy cools off. And with this explosion of credit, there are bound to be non-performing loans in due course. The extent depends on whether it is a hard landing or soft landing…”

Speaking about the global economic recovery, Soros commented:

“The recovery has been anemic; this was to be expected. But now, the increasing concern about rising sovereign debt is working against continued stimulus. And that increases the threat of a double dip. The rising concerns on sovereign debt increases the prospect of a double dip.”

Asked whether he thought that the major economies have taken sufficient action to address fundamental problems of the world economy in the wake of the Global Financial Crisis, such as global imbalances, Soros responded:

No. The global imbalances have continued to increase. Notably, China continues to run a very big current account surplus. That is one reason why an appreciation of the renminbi would be desirable. The task of correcting those imbalances hasn’t yet begun to be addressed.

Meanwhile, in Australia all our economic leaders remain convinced of a China-funded economic miracle, confidently expecting that the Chinese economy will give us up to 4 more decades of “unprecedented prosperity”.

It seems only Barnaby Joyce has his head out of the sand.

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