George Soros is heartened by current efforts to revive growth inthe world's major economies, the hapless eurozone being the oneexception.

“All of the looming problems for the global economy arepolitical in character,” he writes.

The U.S. is showing its muscle as the developed world'sstrongest economy on several counts:

• Shale energy is an important competitive advantage inmanufacturing in general and in petrochemicals in particular.
• The banking and household sectors are deleveraging.
• Quantitative easing has boosted asset values.
• The housing market has improved, with construction loweringunemployment.
• The fiscal drag exerted by sequestration is about toexpire.

“More surprising, the polarization of American politics showssigns of reversing,” Soros writes, the fever apparently havingbroken after the recent government shutdown.

In Japan, Prime Minister Shinzo Abe is launched on a “riskyexperiment” of massive quantitative easing in order to reinvigoratea long-stagnant economy. “Faster growth could drive up interestrates, making debt-servicing costs unsustainable,” Soros writes,but Abe and the Japanese man in the street consider the risk worthtaking.

But “the major uncertainty facing the world today is lies in thefuture direction of China,” he writes. “The growth modelresponsible for its rapid rise has run out of steam.” Thisconstrained the household sector, now only 35% of GDP, in order todrive export and investment growth. But the forced savings can nolonger finance the current growth model, leading to a huge rise inthe use of various forms of debt financing.

Soros sees some “eerie resemblances” with financial condition inthe U.S. leading up to the 2008 crash, but also a significantdifference. Financial markets tend to dominate politics in theU.S., whereas the state owns banks in China and much of theeconomy, and the Communist Party controls state-ownedenterprises.

Sensing danger on the horizon, the People's Bank of Chinastarted curbing growth of debt in 2012. In mid-2013, when theslowdown was causing distress in the economy, the leadershipordered the steel industry to restart the furnaces and the PBOC toease credit. “The economy turned around on a dime,” Soroswrites.

Now, far-reaching reforms announced in November “are largelyresponsible for the recent improvement in the global outlook.”

However, an unresolved self-contradiction exists in China'scurrent policies, according to Soros. “Restarting the furnaces alsoreignites exponential debt growth, which cannot be sustained formuch longer than a couple of years.

“How and when this contradiction will be resolved will haveprofound consequences for China and the world.”

He writes that successful transition in China will likely entailboth political and economic reforms; failure would underminecontinuing trust in the country's political leadership, resultingin repression at home and military confrontation abroad.

Read more: Soros says E.U. heading toward Japan-likestagnation

Soros is downbeat about the European Union, which “is headingtoward the type of long-lasting stagnation from which Japan isdesperate to escape.”

The euro's design has a fatal flaw. Because the common centralbank lacks a common treasury, government debts are denominated in acurrency that no single member country controls, making themsubject to the risk of default.

“As a consequence of the crash of 2008, several member countriesbecame overindebted, and risk premia made the eurozone's divisioninto creditor and debtor countries permanent.”

The current arrangements governing the euro are here to stay,Soros thinks, because Germany will always do the “bare minimum topreserve the common currency.” Moreover, the markets and Europeanauthorities would punish any other country that challenged thesearrangements.

Still, the acute phase of the financial crisis has passed, Soroswrites. European financial authorities, having tacitly recognizedthat austerity is counterproductive, have eased off. Debtorcountries have gained breathing room, and financial markets havestabilized—even in the absence of any growth prospects.

Soros considers the absence of proper global governance to bethe world's other great unresolved problem.

Lack of agreement among the U.N. Security Council's fivepermanent members is aggravating humanitarian catastrophes incountries like Syria, and global warming is allowed to proceedlargely unhindered.

“But,” he writes, “in contrast to the Chinese conundrum, whichwill come to a head in the next few years, the absence of globalgovernance may continue indefinitely.”