Bloomberg News

Soros Says China Missed Window to Stem Prices Amid Bubble

June 14, 2011

(Updates with comment from Soros in fifth paragraph.)

June 14 (Bloomberg) -- China has missed its opportunity to stem inflation and may now risk a hard landing, billionaire investor George Soros said.

The world’s second-largest economy is in a “bit of a bubble,” Soros, 80, said today at a conference in Oslo. There are some signs that China is “losing control,” he said.

China today ordered lenders to set aside more cash as reserves after inflation last month accelerated at the fastest pace in almost three years. Consumer prices rose an annual 5.5 percent in May, even after the central bank raised interest rates four times since September. Inflation has exceeded the government’s 4 percent target every month this year.

China’s formula for steering its economy is “running out of steam,” Soros said, adding the country is seeing the beginnings of wage-price inflation.

At the same time, efforts to restore growth in the U.S. and Europe have failed to address underlying imbalances and the global economy is not “out of the woods at all,” Soros said.

Banks have “not been properly recapitalized” and “underlying imbalances have not been corrected,” he said.

Recovery prospects are being hampered by the fact that the “authorities are not providing a solution,” he said.

Europe has yet to persuade investors its single currency is a functioning system and the euro continues to have “inherent problems,” Soros said. The region is displaying a “two-speed” recovery, led by Germany, while the region’s bailout recipients Greece, Ireland and Portugal struggle to stay afloat.

Turning to Africa

In the U.S., policy makers are trying to balance the target of job creation against the need to reduce debt levels. The World Bank last week cut its estimate for global growth this year to 3.2 percent from a January estimate for 3.3 percent expansion.

Soros said economic turmoil in the developed world is prompting him to turn to Africa, a region he called a “very attractive area to invest in,” adding he is “very much engaged” there.

Soros is chairman of Soros Fund Management LLC, which has about $28 billion in assets. He is best known for reportedly making $1 billion in 1992 on a successful bet that the U.K. would fail to keep the pound in a European exchange-rate system that pre-dated the euro.

--Editors: Tasneem Brogger, Jonas Bergman.

To contact the reporter on this story: Josiane Kremer in Oslo at jkremer4@bloomberg.net

To contact the editor responsible for this story: Tasneem Brogger at tbrogger@bloomberg.net


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