Soros contends that with a growing economy the United States could "tolerate a higher level of debt." He recognized China as a major new powerhouse on the world economic scene and observed that despite risks of inflation, the Asian giant has emerged as the "big winner" in the current financial crisis. No longer isolated, China has become the "main beneficiary" of the globalization of national and regional economies, Soros commented.
The billionaire investor also indicated that he believes last Thursday's hike in interest rates by the European Central Bank came at a "quite inappropriate" time and called China's reluctance to allow currency appreciation a mistake:
There is a real danger of wage price inflation because prices have gone up and particularly real estate prices have gone up. So, the Chinese government I think made a mistake not allowing its currency to appreciate, which would have controlled the price inflation.
Instead, authorities now face 20-percent to 30-percent wage increases, which seem to be falling out of their control, Soros added. Moreover, he sees a shadow banking system that is "growing out of control" in China because of the strong demand for money while banks are refusing to lend.
