Ray Dalio shares his outlook on Covid, real estate, politics in China

BEIJING — American billionaire Ray Dalio mentioned whereas he is far much less conversant in China’s new management crew than prior officers, he expects worries about their future insurance policies are overdone.

That is in keeping with a Nov. 16 publish on LinkedIn that lined his outlook for China’s financial system and coverage.

Listed below are the highlights:

“I need to emphasize that not one of the new folks look like extremists,” Dalio mentioned. “How these coverage makers will stability the trade-offs and regulate is now unknown and doubtless imagined to be extra harmful than no matter they may really do.”

In October, the ruling Communist Social gathering of China paved the way in which for President Xi Jinping to tackle an unprecedented third time period, whereas packing the core management crew together with his loyalists.

“The folks being added are loyal strongmen who look like succesful and have demonstrated observe data of being keen to do the unpopular issues,” Dalio mentioned.

He mentioned he is been advised that Li Qiang — who is anticipated to turn into the following premier — “could be very succesful and pro-business, however I do not know him personally so I do not really feel assured sufficient to say something beneficial about what he’s like or what he desires.”

“I’m advised that He Lifeng will seemingly be Liu He is substitute and is more likely to be much less austere, as his observe file is in constructing infrastructure financed by debt,” Dalio mentioned.

He Lifeng at the moment heads the financial planning company, the Nationwide Growth and Reform Fee. Liu He, a vice premier, has led commerce talks with the U.S., whereas heading the monetary stability committee.

Dalio mentioned the management modifications imply most people he knew who had been “reformist-globalists” are being changed. He famous he hasn’t visited China because the pandemic started.

“When the Xi authorities first got here to energy, I personally knew most of those that ran the financial system beneath Xi properly sufficient to know what they needed and what they had been like,” Dalio mentioned.

The billionaire stepped down this 12 months as co-chief funding officer from the hedge fund he based, Bridgewater Associates. The agency has a subsidiary in China.

In his publish this week, Dalio mentioned his observations drew upon 38 years of “intimate contacts” with folks in China and his analysis of the nation’s historical past going again to the Qin Dynasty about 2,200 years in the past.

Dalio warned that the opportunity of battle with China shall be an overhang for markets and financial exercise in coming years, even when battle by no means really breaks out.

“I’ve heard that in a brand new Republican-controlled Home there’s some chance there shall be a invoice handed supporting the independence of Taiwan, which might be for the Chinese language tantamount to a declaration of battle and would very seemingly result in some form of navy battle with China,” Dalio mentioned.

“Clearly the fact of [war] could be disastrous,” he mentioned. “The nice factor is that wise folks, who’re nonetheless most individuals in energy, perceive that this might be horrible.”

This week, Xi and U.S. President Joe Biden met in particular person for the primary time since Biden took workplace. Many analysts noticed the assembly as constructive for the bilateral relationship, which has grown more and more strained lately.

China’s actual property debt issues and their spillover “into the bones of the financial system” is among the largest challenges for the nation, Dalio mentioned, noting that actual property accounts for a few quarter of the financial system and 70% of wealth.

He expects China can deal with the scenario, however it would take at the very least two or three years. “Even then, it would depart some scars, which is able to seemingly be extra good than unhealthy in the long term as a result of the teachings will stick,” he mentioned.

Dalio additionally mentioned simply eradicating China’s stringent Covid controls will not essentially make the financial system stronger immediately.

“As a result of the previous persons are weak and never protected and since the medical system shouldn’t be ready to adequately deal with numerous previous folks with COVID, this isn’t a simple downside to unravel, although it may be dealt with in a extra focused approach, which is within the works,” he mentioned.