Soros vs China

China just celebrated the ‘Year of the Monkey’. Officially the first three days of Chinese New Year (February 8–10, 2016) are statutory holiday. Chinese New Year’s Eve and three more days are always added to give seven consecutive days of holiday.

But then, it’s back to business – and there is no celebration at all for the chinese. The stockmarket-crash or the slow growth are only the visible surface. Much more profund is the problem that China is burning through its foreign-currency reserves at such a fast pace that the country will run down its cushion in a few months.

This might force the government ‘to wave the white flag and float the Yuan’, says Société Générale global strategist Albert Edwards. The result of a free floating chinese currency would be a massive devaluation. Even the fact, that the ‘People’s Bank of China’ (China’s central bank) has still massive firepower (about 3 trillion USD) to support the Yuan, doesn’t impress anyone anymore. Edwards predicts, that China will be forced to float the yuan within the next six months. And as long as people believe the yuan will fall, the capital outflow will continue, therby further weaken the chinese currency. 

Legendary investor George Soros, who 24 years ago created the ‘Black Wednesday’ by forcing the ‘Bank of England’ to devalue the Pound and cashed in a profit of about 1 billion USD, is also in the game. Judging from his negative comments on China he made recently at the World Economic Forum in Davos, Switzerland, Soros is betting big against China.