Ray Dalio isn’t planning to stop investing in China anytime soon.
The Bridgewater Associates founder and CIO justified his investments in the country in a LinkedIn post Monday, where he underscored the “wonderful 40-year relationship” he has had with the Chinese people and culture — and how his involvement in the country’s markets go hand-in-hand with that relationship, even when times are tough.
“Investing in China has been a success for me in all the ways that I hoped to be successful, including demonstrating to investors how they can do well in both bear and bull markets through smart portfolio diversification and overweighting those assets that are best for whatever the environment is like,” Dalio wrote.
Dalio said he worries about China’s problems just as he worries about the problems facing the U.S., Europe, and any countries he invests in, however different they may be.
While he has considered the risks — that it’s “too controversial because China is considered an enemy, that it’s a communist dictatorship which we should be morally against, that such systems have a clear track-record of failing, that if there is a U.S.–China war it would be disastrous especially if one is an American investor there, etc.” — none of them outweigh the reasons for investing in China, he said.
The U.S.-China relationship, particularly when it comes to the markets, has become increasingly strained in recent years. The Trump administration sparked a trade war with China in 2018 when it imposed sweeping tariffs on Chinese imports over alleged Chinese theft of U.S. technology and intellectual property. This set off a tit-for-tat of retaliatory tariffs and investment restrictions between the world’s two largest economies.
In 2020, the White House banned U.S. investments in Chinese companies that it claimed had links to China’s military, which President Joe Biden expanded upon when he came into office the following year. And last August, Biden signed an executive order aimed at curbing U.S. investments into Chinese semiconductor and artificial intelligence companies, citing national security concerns.
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In addition to the increasingly frosty U.S.-China relationship, China’s economy has suffered setbacks in its post-pandemic recovery that have made it a less-than-ideal investment target for many. When China reopened its borders early last year, many expected its economic rebound to be swift and great. But the reality has been much bumpier.
In 2023, China’s property sector fell into turmoil as developers flailed, sparking fears of a Lehman Brothers-style contagion that could infect the rest of the economy as Chinese equities saw their third consecutive year of double-digit declines. At the same time, the country’s youth unemployment rate soared.
To tackle these issues, the People’s Bank of China adopted the opposite policy approach from its U.S. and European counterparts: quantitative easing. The country’s central bank has lowered key interest rates and reserve ratio requirements in the last few months in an attempt to kickstart its sputtering economy. China’s economy grew 5.2% last year, up from 3.0% in 2022.
Despite all this, or, in fact, because of it, Dalio says it’s prime time to invest in Chinese companies.
“The time to buy is when everyone hates the market and it’s cheap (which is now the case in Chinese equities), especially when it looks increasingly likely that the economic leadership is about to do something like a ‘beautiful deleveraging,’” he wrote, referring to the Chinese central bank’s expected debt restructurings paired with existing easing measures.
“For those reasons, to me the key question isn’t whether or not I should invest in China so much as how much I should invest,” Dalio concluded.