China is facing an economic crisis after a housing boom ended with a bang last year, according to investor George Soros.
The billionaire said in a speech at Stanford University’s Hoover Institution on Monday that President Xi Jinping may not be able to restore confidence in the troubled sector, which has been hit by a series of developer defaults and falling prices. land and apartment prices.
China’s housing boom was based on an “unsustainable” model that benefited local governments and encouraged people to invest most of their savings in property, Soros said.
Government policies aimed at stemming the boom have made it difficult for real estate giant Evergrande to pay off its debts, he added.
The developer has more than $300 billion in total liabilities, including about $19 billion in offshore bonds held by international asset managers and private banks on behalf of its clients.
Evergrande has been struggling for months to raise money to pay creditors.
Government officials have been sent to the company to oversee a restructuring, but there is little clarity on what comes next. Evergrande has appealed for longer, but some creditors seem unwilling to wait.
On Sunday, the company said liquidators had been named for land in Hong Kong, which it pledged as collateral for a $520 million loan last year.
“It remains to be seen how the authorities will deal with the crisis,” Soros said during a panel discussion on developments in China and how the United States should respond. “They may have put off dealing with it for a long time, because people’s confidence has now been shaken.”
In recent years, Soros has emerged as a prominent critic of Xi and the Communist Party of China.
The legendary investor and chairman of the Open Society Foundations said in September that asset manager BlackRock was making a “tragic mistake” by doing more business in China. He criticized Beijing for its policies of surveillance and crackdown on private companies.
The Chinese president now faces real estate risks, according to Soros, who was speaking just days before the start of the Winter Olympics in Beijing.
The price drop “will turn many of those who have invested most of their savings in real estate against Xi Jinping,” Soros said, adding that the current situation “does not look promising.”
“Xi Jinping has many tools available to restore trust – the question is whether he will use them correctly,” Soros said.
Source: CNN Brasil
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