According to George Soros speech on Bloomberg and during an economic forum held in Sri Lanka’s capital, he feels that devaluation of China is highly affecting other countries in the rest of the world. He advised investors to be cautious because the global markets are in a critical condition and also facing a crisis. Soros feels that the attempt of China struggling to come up with a new growth model and devaluation of its currency is acting as a transfer of problems to other parts of the world. Developing countries are having a challenge of returning to positive rates of interests thus this is seen as having the same similarities as the crisis that took place in 2008.
Commodity markets, global currency and stock are in critical conditions since the beginning of the year and furthermore, the sinking Yuan which is raising concern on the strength of the economy of China as it shifts to service and consumptions from manufacturing and investment. The value of global equities early this year reduced by almost $2.S trillion. In addition to this, losses also deepened largely in Asia as fall in the Chinese equities came to an abrupt stop of trade.
Assumptions Made by George Soros
According to Soros, he feels that China is having problems in its adjustment and this can be viewed as a crisis. He compares the current market with the financial markets of 2008 and sees the possibilities of the same crisis recurring. Soros also warned earlier of another catastrophe which is similar to the 2008.From 1969 to 2011, Soros hedge fund firm has managed gaining an average of 20% per year. In addition to this, the Bloomberg Billionaires Index also reports that the firm has a net worth of over $27.3 billion.
By 2020, China’s communist party has put a pledge of increasing the convertibility of Yuan and also dismantles capital controls gradually. China being the second largest economy is facing weaknesses even after cutting down the rates of interest on the Peoples bank of China. It has been noted that this year the volatility measures are surging.
Background Information about George Soros
1. Soros is the founder and chief executive officer of Soros Fund Management and also the Open Society Foundations. He was born in 1930 and managed surviving Nazi occupation which took place during the world war. Soros fled to England from his hometown which was Budapest. His main aim was to be in a communist dominated area. Soros is a graduate of London school of economics. Later on, he moved to the United States where he currently resides. In the United States he accumulated large fortune through investing internationally and coming up with a hedge fund. Apart from work, Soros is also a philanthropist and has done this since 1979.