If George Soros' prediction happens to be correct we may well see a repeat of 2008 financial crisis soon. However, the source country in question this time would not be US but China. Nonetheless, the reasons could well be the same - emergence of complex structured products and excessive leverage.

It is a known fact that credit boom in China is fuelled by shadow banks. In fact, as per Moody's estimate China's shadow banking debt market was roughly 55% of the nation's economic output at the end of 2013. The problem with shadow debt is that it is created by financial institutions outside the regulatory framework. In other words, it is non-bank debt. Similar to bank debt even shadow debt can be structured into a complex investment product. Since the risk in shadow debt repayment is high the return is also high. This attracts investors. However, higher risk means that probability of default is high. And if default happens it can shake investor's faith in such products resulting into basket selling. Very recently one such Chinese investment trust which issued structured products on shadow debt had to be wound up. This has sent ripples across the Chinese market. If a few other instances like these occur, China may witness a wave of defaults. And this can have cascading effects similar to the 2008 crisis.