Billionaire investor George Soros said China’s growth is slowing

Bloomberg News
October 15, 2012

Billionaire investor George Soros said China’s growth is slowing because household spending as a percentage of the world’s second largest economy is waning.

“The growth model which has worked is running out of steam because consumption as a percentage of GDP has fallen” to one- third of output from half, Soros said at a National Association for Business Economics conference in New York today. Central bankers “will have to modify the growth model and somehow allow the household sector to have a bigger share of the total.”

China’s economy expanded 7.6 percent in the second quarter from a year earlier, the least in three years. The IMF this month cut its estimate for China’s 2012 growth to 7.8 percent, which would be the weakest pace since 1999, from 8 percent.

Soros said the unprecedented actions global central banks have taken to stimulate growth are necessary to “prevent a depression,” yet the “big open question” is whether they can exit the stimulus programs when the economy rebounds without spurring inflation. The programs include three rounds of so- called quantitative easing by the Federal Reserve and the European Central Bank holding its main rate at a record low 0.75 percent.

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