Is China’s economy headed for a crash?

In his assessment of the global economy’s performance 2013, legendary financier George Soros warned of dangers in the Chinese economy:

The major uncertainty facing the world today is not the euro but the future direction of China. The growth model responsible for its rapid rise has run out of steam.

That model depended on financial repression of the household sector, in order to drive the growth of exports and investments. As a result, the household sector has now shrunk to 35 percent of GDP, and its forced savings are no longer sufficient to finance the current growth model. This has led to an exponential rise in the use of various forms of debt financing.

There are some eerie resemblances with the financial conditions that prevailed in the U.S. in the years preceding the crash of 2008. [Project Syndicate]

That, as William Pesek notes, is a rather ominous conclusion. So is China due a crash?

Read More At TheWeek.com

Advertisements