Global investor and business mogul George Soros warned an economic forum about the coming crises that is about to impact the world. George Soros is a very knowledgeable and insightful businessman who has the ability to figure out how situations are going turn out. Soros is known for his bold predictions about specific events that impact the global economy and independent nations. His prediction about another coming global recession has been triggered by the economic situation that is taking place in China.
China has the second best economy within the world. This country has been growing very strongly for many years but they are now facing some challenges that could impede their development. For years the country experienced a phenomenal growth rate that was backed by plenty of investors who were willing to risk their money with the nation’s economic progress.
China’s growth was stimulated by its ability to output products. This nation was making everything imaginable and then shipping it to other parts of the world. Much of China’s economic development and growth was fueled between outside investors and businesses that used China’s relatively cheap labor force to manufacture a whole lot world of products. This all changed by the end of 2013.
When 2013 rolled around the nation started to consume more than it produced. Traditionally, the Chinese people were not a big consumer of goods like many western countries and Japan. As a lot of goods started to become cheaper and more available in China this allowed many consumers within the nation to buy them up. China’s GDP is now the second highest on the planet.
Soros said on Bloomberg Business he is afraid that China’s currency (the yuan) is starting to weaken because its people are spending so much money. This spending is starting to overtake China’s output and as a result the nation is no longer exporting as many goods as it did in the past. Do not forget that China is the world’s largest trader of international goods. This country relies on its position as a major trade partner to stimulate economic growth. While China still retains their spot as the number one trader there is evidence that shows that they are not as strong as they used to be in this regard.
The yuan is being overvalued against the US dollar. When trade takes place between these two types of currencies the yuan is doing so at a higher rate than what it should be valued at. In other words people can pay more money for Chinese products and goods than what they are worth. If they are exchanging goods for more than what they are worth this too can cause a disruption in the market. The bottom line is that Soros is not speaking absurdly about what is happening with this country. To find out more about George Soros’s views you can read the article George Soros Sees Crisis in Global Markets That Echoes 2008