China's credit growth in March (and $1 trillion surge in total social financing in Q1) is a "warning sign" according to billionaire George Soros, "because it shows how much work is needed to stop the slowdown." Speaking at an event in new York this evening, Soros commented on "troubling developments" in China, the anti-corruption drive's impact on capital outflows and the real-estate bubble "feeding on itself." His conclusion, rather ominously, was that despite all the naysayers and fiction-peddlers, China "resembles US in 2007-8," before credit markets seized up and spurred a global recession.
As Bloomberg reports, Billionaire investor George Soros said China’s debt-fueled economy resembles the U.S. 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 on Wednesday. The broadest measure of new credit in the world’s second-biggest economy was 2.34 trillion yuan ($362 billion) last month, far exceeding the median forecast of 1.4 trillion yuan in a Bloomberg survey and signaling the government is prioritizing growth over reining in debt.[ZH - f one adds up the Total Social Financing injected in the first quarter, one gets a stunning $1 trillion dollars in new credit, or $1,001,000,000,000 to be precise, shoved down China's economic throat. As shown on the chart below, this was an all time high in dollar terms, and puts to rest any naive suggestion that China may be pursuing "debt reform." Quite the contrary, China has once again resorted to the old "growth" model where GDP is to be saved at any cost, even if it means flooding the economy with record amount of debt.With China's debt/GDP already estimate at 350%, how much longer can China sustain this stunning debt (and by definition, deposit) growth continue?]Soros, who built a $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 that he’s 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 then went on to note that China’s capital outflow is a growing phenomenon driven by the nation’s anti-corruption campaign, which makes people nervous and spurs them to pull money out, and added that...
China’s decoupling of the yuan from the U.S. dollar can help rebalance the currency.The linking to a basket of currencies is a “very positive, healthy” development for world.
Finally in an ironic twist for a man who has all too often used the press for his own ends...
China’s lack of a free press is “troubling development".
Of course one should bear in mind that Soros is among those who are betting heavily on the eventual devaluation of The Yuan against the USD, and as we noted previously, the cracks are starting to show... As the Chinese corporate bond market begins to break...
Credit to Zero Hedge
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