Don’t worry too much about the U.S. or Europe, says George Soros.

Don’t worry too much about the U.S. or Europe, says George Soros.
The major uncertainty facing the world today is China, writes the billionaire investor in a column for the Project Syndicate website. He says: “There is an unresolved self-contradiction in China’s current policies: restarting the furnaces also reignites exponential debt growth, which cannot be sustained for much longer than a couple of years.” The People’s Bank of China moved to rein in debt in 2012, but then the world’s No. 2 economy experienced “real distress,” Soros writes. So China’s Communist Party reasserted its supremacy, ordering steelmakers to restart their furnaces and bankers to ease credit.
China’s economy turned around, and party leaders also announced major reforms in November. “These developments are largely responsible for the recent improvement in the global outlook,” Soros says.

What happens next? The 83-year-old Hungarian-American sees two possibilities: “A successful transition in China will most likely entail political as well as economic reforms, while failure would undermine still-widespread trust in the country’s political leadership, resulting in repression at home and military confrontation abroad.” Beyond China, Soros argues that a lack of proper global governance is the “other great unresolved problem.” That could continue indefinitely, while the Chinese conundrum will come to a head in the next few years, he says. Regarding the U.S., Soros sounds upbeat, pointing to themes like the energy boom, less polarization lately in politics and improvements in the banking and housing sectors. When it comes to Europe, he says the “revival of a threat from Russia may reverse the prevailing trend toward European disintegration.”