Why Ray Dalio Sees a Huge Problem in China But Still Invests There

"I have had a wonderful 40-year relationship with the Chinese people and the Chinese culture that has led me to love them."

Ray Dalio
Ray Dalio speaks during China Development Forum (CDF) 2023 at Diaoyutai State Guesthouse on March 25, 2023 in Beijing, China. Lintao Zhang/Getty Images

Ray Dalio, the founder of the world’s largest hedge fund Bridgewater Associates, believes now is the time to buy Chinese stocks despite warning about a “100-year storm” in an essay last week. Amidst pessimism around a slowing economy, an aging population, and a massive real estate and debt crisis, Dalio described China’s problems as “manageable by Chinese leaders if they do their jobs well by being both smart and courageous” in a blog post this week.

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“The time to buy is when everyone hates the market and it’s cheap,” Dalio wrote. The Chinese stock markets have shed $6 trillion in the last three years, while Beijing policymakers look to shore up stimulus to recoup optimism. The efforts have started to materialize: the MSCI China Index, which monitors over 700 companies traded within China and internationally, is among the top performers compared to other major global indices in the last few months, rebounding 12 percent from a low point in early January.

Still, the broader economy looks gloomy. The International Monetary Fund (IMF) forecasts China’s GDP growth to hit 4.6 percent in 2024—short of the government’s 5 percent target—expects it to slow further to 3.5 percent by 2028.

In his essay last week, Dalio described Chinese President Xi Jinping’s warning of a “100-year storm” from a few years ago as beginning to materialize like the “early days of a hurricane,” acknowledging that high amounts of debt, cultural and geopolitical tensions with the U.S. and other parts of the world, and intensifying tensions regarding a growing domestic wealth inequality, as crises casting a shadow on China’s future. Such negative prospects don’t discourage the billionaire investor, however. “The key question isn’t whether or not I should invest in China so much as how much I should invest,” Dalio wrote this week.

Dalio’s affinity for China extends beyond mere financial interest. He acknowledges a deep connection with the Chinese people and culture, underscoring the symbiotic relationship between his personal sentiments and investment strategy. “I have had a wonderful 40-year relationship with the Chinese people and the Chinese culture that has led me to love them,” he wrote. “I invest in China because I have pretty much always been involved in the Chinese markets.”

Dalio has a long history with China outside of business. His philanthropy, today known as Dalio Philanthropies, originally began as the “China Care Foundation” after raising $15 million to support special needs children in the country. Dalio and his wife, Barbara, founded the Beijing Dalio Welfare Foundation in 2013 to help underserved communities in China and is one of the main benefactors of the China Global Philanthropy Institute, a think tank to develop philanthropy in the country.

Worries surrounding China extend beyond economic considerations to political ones as well. Dalio characterizes this concern as Xi Jinping’s embrace of “legalism,” a concept deeply rooted in Chinese history advocating for stricter adherence to government authority during challenging periods. “With the current shift towards a more legalistic, autocratic, communist direction, questions naturally arise about the extent of this trend,” he observed, referencing the stark transition to Communist rule in the mid-20th century as an extreme example that Chinese leadership has since moderated towards a more market-oriented approach.

Dalio suggested his optimism in investing in the country is likely not driven by the macro outlook but by individual undervalued opportunities. “I find high-quality Chinese assets very attractively priced and I have done very well investing there,” he wrote. Bridgewater, after a fundraising round that closed in January, is set to double its investments in China.

Why Ray Dalio Sees a Huge Problem in China But Still Invests There