Economic Battle Royale: George Soros vs PRC

Mahathir and Soros eventually reconciled, but will Chinese authorities be so forgiving?

This could be a battle for the ages if it comes true: During the Asian financial crisis, then-Malaysian Prime Minister Mahathir Mohamed famously singled out George Soros as a villain in depressing any number of Asian economies to make a quick buck through currency speculation. Aside from calling Soros a "moron," Mahathir launched all sorts of tirades against the famous financial figure, prompting a heated exchange of words:

"I know I am taking a big risk to suggest it, but I am saying that currency trading is unnecessary, unproductive and immoral," Mr. Mahathir said Saturday night. "It should be stopped. It should be made illegal. We don't need currency trading. We need to buy money only when we want to finance real trade." 

On Sunday, Mr. Soros said: "Dr. Mahathir suggested banning currency trading. This is such an inappropriate idea that it doesn't deserve serious consideration. Interfering with the convertibility of capital at a moment like this is a recipe for disaster. Dr. Mahathir is a menace to his own country..."

When Thailand's currency crisis caused the Malaysian ringgit and other regional currencies to crash last month, the Malaysian prime minister blamed hedge-fund investors such as Mr. Soros, whom he called "a moron."  

The picture above dates from 2006, when the antagonists finally met face-to-face. Apparently, Mahathir had softened his views of Soros by then. Among other things, he mentioned that he no longer believed that Soros shorted Asian currencies like the Malaysian ringgit during the crisis:

Malaysia's former premier Mahathir Mohamad today met his old foe George Soros and said he accepted the billionaire financier was not responsible for the 1997-98 Asian financial crisis. Mr Mahathir has long blamed Mr Soros for undermining South East Asian economies by destabilising their currencies, and famously called him a "moron".

"Mr Soros said he was not involved in the devaluation of the Malaysian currency and that other people were involved. And I have accepted that," Mr Mahathir said at a joint press conference.

However, George Soros' reputation precedes him of being "the man who broke the Bank of England." By speculating against the pound's devaluation way back when, Soros made a tidy profit and gained global notoriety as a currency speculator. And so it is again with China's financial markets causing adverse spill-on effects on the rest of the world (particularly Asia). At the ongoing Davos meeting, Soros suggested that he was positioning against Asian currencies, raising the particular ire of the Chinese government. They have now warned him about speculating against the yuan and the Hong Kong dollar (which is pegged to the US dollar):

China’s state press is warning George Soros not to bet against its currency after the hedge fund star-turned philanthropist predicted a “hard landing” for its economy last week. “Soros’ challenge against the renminbi and Hong Kong dollar is unlikely to succeed, there is no doubt about that,” the overseas edition of People’s Daily, the Communist Party’s main mouthpiece, said Tuesday...

But China’s warning was strange for one reason: Soros never said he was betting against the renminbi or Hong Kong dollar. At the World Economic Forum in Davos, Soros was light on specifics, only saying he was betting against U.S. stocks and Asian currencies. 

If your reputation is like that of Soros, even the merest hint of speculation against Asian currencies brings a warning from PRC officialdom. (Consider yourself warned, Mr. Soros.)