Archive for the ‘China’s Economy’ Category

George Soros China

April 29th, 2016

George Soros is a world- class financial trader and speculator. He first studied at the London School of Economics in the 1950s. He moved to New York and started his flagship Soros Fund Management in 1970.

Of this generation of traders Soros is legend. His Soros Fund Management racked up 30% profits each year for 30 years. The only other person to do this is Warren Buffet.
 Soros is a big trader on https://en.wikipedia.org/wiki/George_Soros and is not afraid to take big positions. In 1992 he shorted 10 billion British Pounds ahead of the devaluation of the Pound. He netted 1 billion British Pounds on this one trade. He is often called the man who broke the Bank of England.

George Soros retired from active trading in 1979 to start a second career in philanthropy. His Soros Fund Management continued to earn 20% a year for the years 1979 through 2011. His fortune is estimated at $24 billion.

He has written several books, essays and commentaries on world events. His most recent comments on http://www.bloomberg.com/news/articles/2016-04-20/soros-says-china-s-debt-fueled-economy-resembles-u-s-in-2007-08 are directed toward China and China’s growing debt problem.

China’s economy suffered a severe set back during the 2008-09 financial meltdown in the United States. China’s economy was built upon exports. The enormous profits garnered through world trade gave China the funds to change its economy from mainly agrarian to an industrialized state on https://www.opensocietyfoundations.org/people/george-soros. When the crash occurred these funds dried up quickly. Where China’s growth was 10% per year it now has shrunk to about 6%. The loss of revenue has forced China to reshape its economy toward a consumer driven model instead of its strictly driven export model.

This transition has been extremely painful. China has had to cut interest rates and increased lending to keep its basic industries afloat.
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George Soros holds that this excessive lending is creating a parabolic (J Curve) with ever increasing spending. He cites the new credit of 2.34 trillion yuan ($312 billion) last month when Bloomberg economists predicted only 1.4 trillion yuan. Most of this new lending is used to keep bad debts and loss making enterprises alive. Soros believes that a hard landing is “practically unavoidable.”

This excessive lending has led to a housing bubble where home prices in some cities have risen as much as 62%.

Soros feels that China may be able to withstand another year or two before the bottom falls out. It is important to note that China does have deep pockets in the amount of $3.12 trillion in reserves. The hope of world economies is that they can stabilize and resume further growth. Whether or not this plays out remains the big “what if.” What if world economies don’t start to grow again?