China has an enormous amount of economic power. For the last 50 years, the Chinese manufacturing base provided the world with almost every product under the sun. The prices were so low that manufacturing companies around the world had to close their doors because competing with the Chinese was a lost cause. China became the king of the cheap market, and it kept wholesale and retail markets stocked with quantity, not quality. It looked like China was going to be the king of cheap forever, but something happened about five years ago. China’s manufacturing base started to sneeze from labor and material increases, and parts of the world came down with a recessionary cold, according to hedge fund investor and social activist, George Soros.
The question that trading partners and investors started to ask was, is China’s factory base sicker than the Chinese say it is. After all, China’s GDP was in overdrive. Year after year, for the last 20 years, China’s GDP was growing at a rate of seven percent a year, but that rate dropped in 2015 to less than 6.8 percent, and emerging markets started to unravel.
Soros thinks China’s currency value is inflated, and it will depreciate in 2016 regardless of China’s capital investments. That will have an impact on other Asian currencies and economies. George Soros, the emerging market investor, and economics expert, told Bloomberg.com that China is the main reason there is a recession in Brazil and other emerging markets.
The fact that a recession in Brazil, Russia, South Africa and Taiwan shouldn’t have an impact on the United States economy, but it has. Even though the U.S. GDP growth rate is in the neighborhood of 3.8 percent, economists say that rate is unstainable because of emerging market export bubble is popping. China is one of the agents responsible for that popping, but there are other factors that George Soros mentions as the ingredients for a global recession.
Another factor is the potential collapse of the European Union. Several EU members are dangling from the ledge of bankruptcy. European GDP product growth is weak, and it is getting weaker because the euro has lost its ability to appreciate against other currencies. The migration crisis is making matter worse for the EU, and the wars in the Middle East continues to derail Europe’s chance to pull out of their economic tailspin.
The drop in crude oil prices may be good for consumers, but it has been bad for countries around the globe. Corporate earnings started to drop in 2015, and there’s a chance 2016 will be another bad year for earnings. Soros recently told an interviewer that when all of those issues are considered, the threat of a global recession on the scale of the 2008 meltdown is extremely likely, and some economists say will happen in 2016.