George Soros Warns of Economic Crisis in China After Real Estate Boom Ends With a 'Bang'

Last year, the Chinese economy expanded about 8.1%, significantly exceeding the government's forecasts, even though the growth was undermined by the tumult on the real estate market and renewed COVID outbreaks in the closing months of 2021.

Billionaire philanthropist George Soros has claimed that China is facing an economic crisis after the nation's real estate boom ended with a "bang" last year, and that it is President Xi Jinping who should restore confidence.

Speaking at Stanford University's Hoover Institution on Monday, the 91-year-old founder of the Open Society Foundations accused the world's second-biggest economy of becoming too dependent on using property development for power growth.

"The model on which the real estate boom is based is unsustainable. People buying apartments have to start paying for them even before they are built. So, the system is built on credit. Local governments derive most of their revenues from selling land at ever-rising prices", the billionaire said.

Soros was referring to the situation with the Chinese real estate giant Evergrande, the second-largest property developer in China. Since July 2021, Evergrande has been on the verge of default after years of growth and active borrowing. Declining sales, a high-risk business model, and Beijing's actions to curb a bubble in the Chinese housing market pushed the company into crisis. In late June, Evergrande's debt stood at a whopping $304 billion.

The billionaire suggested that the falling prices in many parts of China "will turn many of those who invested the bulk of their savings in real estate against" Chinese President Xi Jinping.

"It remains to be seen how the authorities will handle the crisis. They may have postponed dealing with it for too long, because people's confidence has now been shaken", Soros stated.

At the invitation of U.S. President Joe Biden, Chinese President Xi Jinping attends the Leaders Summit on Climate via video link and delivers an important speech titled "For Man and Nature: Building a Community of Life Together" in Beijing, capital of China, April 22, 2021.

© Huang Jingwen

He argued that the Chinese president "has many tools available to reestablish confidence — the question is whether he will use them properly".

"It is to be hoped that Xi Jinping may be replaced by someone less repressive at home and more peaceful abroad. This would remove the greatest threat that open societies face today and they should do everything within their power to encourage China to move in the desired direction", Soros concluded.

Soros spoke as US Federal Bureau of Investigation (FBI) director Christopher Wray asserted that the Chinese government's current threat to the West is "more brazen, more damaging" than ever before.

In a speech at the Reagan Presidential Library in California, Wray accused Chinese authorities of stealing US ideas and innovation as well as conducting massive hacking operations.

He made it clear that Washington continues to regard China as the biggest threat to America's long-term economic security.

"When we tally up what we see in our investigations, over 2,000 of which are focused on the Chinese government trying to steal our information or technology, there's just no country that presents a broader threat to our ideas, innovation, and economic security than China", the FBI boss claimed.

The remarks came a few weeks after President Joe Biden told reporters that the US and China need not confront one another, but have a technological and economic competition instead.