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