Bloomberg
Much depends on the health of the Chinese economy, Soros said in remarks at a Bretton Woods conference at the World Bank.
If China’s efforts to transition to a domestic-demand led economy from an export engine falter, there is a “likelihood” that China’s rulers would foster an external conflict to keep the country together and hold on to power.
“If there is conflict between China and a military ally of the United States, like Japan, then it is not an exaggeration to say that we are on the threshold of a third world war,” Soros said.
Military spending is on the rise in Russia and China, he said.
To avoid this scenario, Soros called on the U.S. to make a “major concession” and allow China’s currency to join the International Monetary Fund’s basket of currencies. This would make the yuan a potential rival to the dollar as a global reserve currency.
In return, China would have to make similar major concessions to reform its economy, such as accepting the rule of law, Soros said.
Allowing China’s yuan to be a market currency would create “a binding connection” between the two systems.
An agreement along these lines will be difficult to achieve, Soros said, but the alternative is so unpleasant
“Without it, there is a real danger that China will align itself with Russia politically and militarily, and then the threat of third world war becomes real, so it is worth trying.”
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