For years, China was the main engine on the global economic train. Whatever China did was right, according to some economist. China was the major source of cheap products for the world, and one of the main investors in assets in other emerging markets. China was a global importer that couldn’t get enough resources and materials from Brazil and other developing nations, but something happened. The Chinese are victims of their own success. Prices started to increase and their manufacturing sector began to break down.
The great Red Nation is pushing itself to convert itself to a consumer and service economy, and the push hasn’t been hard enough. According to the legendary hedge-fund investor, George Soros, and other great investors, China could bring the global economy to its knees because of their currency manipulation, their stock market issues and their export flaws.
The idea that China could wreak havoc on the rest of the world was ignored for years. Financial experts and reporters said China couldn’t bring down the global economy, but George Soros, the man that is considered the smartest investor in the world, said that was just wishful thinking. Soros has been talking on Bloomberg about a global meltdown as large as the 2008 meltdown for quite some time. Even the Chinese government disagrees with Soros. Chinese Premier Li Keqiang told reporters recently that China wasn’t globally exporting deflation.
But according to a Bloomberg.com article, Soros said that is not true. At the Davos Economic Summit, Soros called China one of the three causes of global deflation. The other two causes, according to Mr. Soros are competitive currency devaluation and commodity prices. China is involved in those other causes as well.
China has been manipulating its currency since last December and in order to boost their export business the Chinese have been played a role in decreasing commodity prices. China’s manufacturing base is deteriorating faster than the transition to a consumer based economy, and the Chinese are using every trick in the book to keep adding fuel to the enormous Chinese engine. But that fuel is creating some serious issues for the rest of the world.
The world is not a healthy place, according to Soros. Mr. Soros expressed his views in a CNBC.com article recently. He said Europe is under siege due to the migration crisis. The Middle East is on the verge of a major war, and Russia is experiencing a recession and Ukraine fall-out. Several emerging markets are fighting recessions, and the United States is facing one of the most crucial presidential elections in its history.
There are always predictions about the global economy, but the Soros prediction has merit, according to some of the smartest minds in the financial industry.