According to George Soros as reported on Bloomberg, China is having a “major adjustment problem.” He also told investors to be cautious because current economic conditions in many ways resemble 2008.
Why should anyone listen to Soros? That’s what the public probably wants to know. The fact that this man began his career and built it up in a lifetime to a net worth of more than $27 billion is one reason why. His successful track record – particularly that of his $1 billion profit made on a deal in 1992 – does not always guarantee he is right. However, the people who seek him for mentorship seem to respect his opinion and heed his predictions.
Soros told anyone who would listen about how China’s economy the first week of 2016 “amounts to a crisis.” He also mentioned that when he looks at the financial markets right now it reminds him of the 2008 recession. One of his major evidences used to support this perspective is the falling value of the Chinese yuan. The plummet in cost of this currency caused the worst stock market crash on Wall Street within three months. Likewise, Asian markets started out the new year quite rough.
One of the hugest occurrences reported is the $2.5 trillion decline in global equities. This all has been largely been blamed on the shifting of China’s economy. This country is changing from an investment and manufacturing nation to one driven by consumption and service industries. It could be just a temporary transition. However, it seems to be affecting the world in a way that caused George Soros to warn people about the possibility of a repeat of the 2008 economic fallout.
It should be pointed out, however, that this is not the first time that George Soros predicted another 2008 crisis. After Greece started struggling financially, Soros said this was more serious than what occurred about eight years ago. Still, rumor has it Greece is recovering well already. So what is it about first the Greek and Chinese economic crunches that makes one of the richest man in the world declare a possible recession?
The Greece situation seems to be for the most part resolved, so it does not apply as much as the China situation right now. However, Strategy + Business suggests that repeated reduction in spending is what partly resolved this country’s crisis. This ties into what it appears Soros is saying to investors — to slow down on making financial moves right now.
The rising Chinese debt-to-income ratios and increased Asian global trade problems seems to be causing quite a scare. After all, the Dow Jones was down by just more than 392 points by closing time on January 7, 2016. Whether or not the fears are founded concerning China’s economy, investors can consider themselves warned.