By Ruma Dubey

George Soros said very ominously at the beginning of 2016, “it’s the 2008 crisis all over again”.

His words were said coincidentally when China once again devalued its yuan and sent the world markets crashing, making one wonder whether Soros words were indeed prophetic.

The current place where we are in does not look good – that much credit we can hand over to Soros but a repeat of 2008? Now that is indeed too dramatic even for a drama queen!

But is not as though Soros was talking through his hat; his statement is obviously based on facts. His saying to some extent is right – the present gloom and doom kind of atmosphere is coming this time from China unlike last time, where the epicenter was USA. There is simply no denying the fact that China is sitting on a tinder box and when its lid blows, it will take the world along with it.

And the fire to light up the tinder box will be the debt – China’ current debt, money borrowed to build its large capacities is probably bigger than its Great Wall. China’s total debt as a percentage to GDP stands at over 250%. This is being compared with USA’s housing mortgage pile up which ultimately led to the crisis. Thus like USA, China has a huge sub-prime crisis on hand with debts being doled out with any attention to credit quality and misallocated resources.

Yet this time, it is different. No doubt a collapse of China, the second largest economy in the world after USA, will have repercussions world over; we all are already feeling the effect of the slowdown across all sectors. But it will not be a repeat of 2008 and here are the reasons why:

1: The biggest difference this time around is that after 2008 which just crept up on people, there is more awareness. Traders and investors now do not trade blindly; they do have an ear to the ground, always on the lookout for an impending crash. To put it technically, the markets have already factored in the fear factor. The low indices and corrected PEs reflect investors fear thus chances of a complete breakdown, a crisis or mayhem is ruled out.

2: USA economy is on the mend with manufacturing as well as services showing a pick up. Employment numbers have also been good. The largest economy doing well acts as a cushion. Europe is also slowly recovering; so all is not well but neither is all lost.

3: China's economy is grappling with massive capital outflows as jittery investors pull out of emerging markets. China suffered almost $700 billion of capital flight in 2015 according to the Institute of International Finance – an indication that risks are already being spread unlike in 2008 when the asset bubble burst, it took down all the money with it.

4: The Chinese Govt is deft and authoritarian enough to handle an impending crash – it controls the economy thus any action plan needed will be taken with no voice of dissent being heard. Also remember, China has some $3.3 trillion in reserves – this is what will come to the rescue if push comes to a shove.

5: The most important fact – Chinese banks are not as closely tied to western financial system like the way USA is or the way, Lehman or Bear Sterns was. Thus to that extent a domino or contagion effect is limited. This is one fact which in itself should tell us why this time around it is not like 2008. Yes, the effect of slowdown through the various companies which have global tie-ups will be felt.

Thus a repeat of 2008 does not seem likely but let us not kid ourselves – 2016 does look tough; it will take a lot out of us to get through. Then again, if things change within India, if the Govt is able to implement at least half of what it had promised, China and rest of the world will not matter. As a matter of fact, if Parliament does manage to function and legislative actions does start happening, the rest of the world will come knocking into India. If we get functioning well within, well, the world will matter less.