When George Soros comes out and makes a prediction or a forecast, investors and traders listen. You do not have to like him or hate him to realize that if he has made billions of dollars in the financial markets is not out of luck.
February 7, 2014 (Newswire) - George Soros is a great investor and trader who made himself noticed many years ago when he almost broke the Bank of England. For many, Soros is a hero and a role model to look upon, but for others he is just an opportunistic trader that tries to manipulate markets for his own benefit. In any case, when Soros comes out and makes a prediction or a forecast, investors and traders listen. You do not have to like him or hate him to realize that if he has made billions of dollars in the financial markets is not out of luck.
According to the latest prediction of the financial guru, the world will fall back into recession caused by China. Soros is saying that due to the current development of events in China, like the slowdown in manufacturing and the service sector, this could cause a big drop in the Chinese economy, which is the world's second largest economy. The analysts of the Binary Options Broker Optionova are trying to figure out if there is a hidden personal agenda in Soros' comments. Is he maybe trying to buy Chinese assets, but want them to fall further before buying? Who knows what his real intentions are, but let us take a look at the most plausible theories.
On the latest comments by Soros, he not only forecasted a bad year for China, but also for the Euro Zone. According to Soros, the future of the Euro is in trouble, because of the recent problems that the Euro Zone is facing in terms of a possibly falling into deflation and the European Central Bank getting ready to implement more stimulus measures and even lowering interest rates more.
A key point that Soros brings up when predicting gloom and doom for China is the growing debt by Chinese municipalities and provinces, which has reached more than 3 trillion Dollars. This figure is amazingly twice the national debt of China. Mr. Nick T. from Binary Options Broker Optionova explains that George Soros could be feeling this way about China, because of the circumstances that have brought the rapid growth of GDP in China, overheating the economy.
There are also growing problem in infrastructure projects that are getting overpriced and their budget is getting out of hand. Last year, GDP growth was about 7.6%, which has been the weakest result since 1999. The banking sector has serious problems too, because of credit defaults and the unpaid massive infrastructure projects. Last year, the Chinese people had to oppose an increase in the interbank lending rates, which have risen to alarming levels.
From an objective point of view we can say that all of the above reasons can cause investors and analysts to worry about a collapse in the Chinese economy, but are these reason justified? Does George Soros have an ulterior motive to exacerbate these issues?
The speculation around Soros's motives for bashing down the Chinese economy has caused some people to believe that Soros was instructed by the United States to stop the growth of China and prevent it from becoming a world super power. The believers in conspiracy theories say that there is a media movement in which Soros is included to spread out negative predictions on China to make the rest of the world think that China will be coming down or that it has become a bubble that is ready to explode.
Another theory is that Soros is doing it to gain advantage in his personal trading. People believe that he has hidden positions in Chinese assets. It is possible that Soros decided to buy part of the debt and assets of China, but first wants to bring their prices down to buy cheaper, like the Yuan, hoping to capitalize on the rebound. Soros got the name of the man who almost broke the Bank of England in 1992, when he the Pound went down 3000 points and Soros' fund at the Quantum Company made more than two billion Dollars in profit. Based on this type of behavior, experts are taking Soros' predictions with some caution, because he may be planning a similar move with the Yuan.
Some people have an even crazier idea that Soros was asked by the very same Chinese authorities to keep the Yuan low. It makes sense, because China doesn't need a very strong Yuan, because it hurts its exports, but could this be real? It is really very unlikely that the financial guru was contacted by the Chines to do exactly this.
Let us remember that Soros made some forecasts about Russia bending to the will of the Euro Zone and that the Euro was going to disappear. None of these predictions have come true, that is why not everyone is buying into Soros' predictions this time. The experts of Binary Options Broker Optionova believe that the conflict between Soros and China is in on the media front and nothing will really happen, just like nothing has happened according to his predictions on Russia and the Euro.
One thing that the experts point out for sure is the fact that the Quantum Company, run by Soros, has not taken any new positions on any Chinese investment vehicle or asset. But according to the same experts, it will be very hard for Soros to take on this mission on his own. China is a very huge country with a massive economy.
The Chinese economy is controlled by the government and this makes it very hard for a single person or even a group of persons to create a financial crisis or manipulate the markets. We must keep in mind that China is not a free market like Europe and the rest of Asia. Besides, the Yuan is not a free commercial currency and it is tightly controlled too. The Yuan in the international vaults is not held as a reserve currency; therefore, it would be very difficult to over sell it.
The latest price action on the Yuan versus the Dollar shows that recently the Yuan reached the 6.095 level, which is the highest since the government started to ease its currency controls back in 2005. This data was compiled and analyzed by the experts of Binary Options Broker Optionova at the international trading desk department.
After the world economies started to expand following the global financial crisis, China started consuming a lot of commodities to fuel it growth, but things are starting to slow down a little bit again. But in comparison to other major economies, China will keep needing more and more commodities and it will keep consuming a lot of energy sources to keep the current financial expansion from contracting.
One thing that China has to its advantage and that is playing in their favor is that China has the biggest currency reserves in the world and this will definitely give the Chinese a very good cushion to fall on. Government assets are a big chunk of the country's gross domestic product; therefore, the risks of a financial crisis in China are very low. On top of this, the balance sheet of the Chinese central bank is still healthy and robust.
The Chinese government has already implemented some measures against credit defaults in banks and raised the reserve rate that they must keep in place. On a last note, let's not forget that the Chines banking system is controlled by the government and it would be very difficult for George Soros to perform another stunt like the one he did with the Bank of England.
The experts of Binary Options Broker Optionova agreed with the analysts at the Masterforex-V World Academy that it would be very difficult if not impossible for a single person to manipulate the Chines markets at their will. This economy cannot be compared to the United Kingdom and the controls that the Chinese have in place are very hard to bypass.