As the Chinese stock market continues to plunge, billionaire investor George Soros said Thursday that the backward slide has ominous similarities to the global crash of 2008.
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He was speaking at an economic forum in Colombo with Sri Lanka’s President, Prime Minister and other senior officials in attendance.
“Unfortunately China has a major adjustment problem and it has a lot of choices and it can actually transfer to the rest of the world its own problems by devaluing its currency and that is what China is doing”, Soros said of the world’s second largest economy. He added that China is struggling to develop a new growth model, and the devaluation of its currency is causing problems around the world. “I would say it amounts to a crisis”.
Is the market wrestling with a financial crisis as ugly as 2008?
The man with a net worth of $US27.3 billion certainly knows a little something about financial markets, but it’s not the first time George Soros has made economic doomsday predictions by suggesting a repeat of 2008.
Measures of volatility are surging this year.
China’s Communist Party has pledged to increase the yuan’s convertibility by 2020 and to gradually dismantle capital controls.
The sell-off was sparked by a surprise move by People’s Bank of China (PBOC), which set the official midpoint rate on the yuan, also known as the renminbi, at 6.5646 per dollar, the lowest since March 2011. Data this week reinforced a sluggish manufacturing sector.
However, on Thursday China ditched the new mechanism, after it was triggered for the second time in a row following the shortest trading session in history when the market plummeted another 7%. It remains 10% down for this year to date.
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Treasuries rose a sixth day, the yen reached a four-month high and gold surged on haven demand.
