Hedge Funder Dalio: U.S., China May be Headed for War
The U.S. is in a pitched battle with China, notwithstanding the efforts of Presidents Joe Biden and Xi Jinping to make nice in a meeting Nov. 14.
The two nations are battling over trade, technology and military issues. The U.S. is upset with China’s predatory trade practices and efforts to acquire Western technology to build its military prowess. The U.S. also is displeased with China’s determination to absorb Taiwan.
All this has Ray Dalio concerned. The retired founder of Bridgewater Associates, the world’s largest hedge fund management firm, has long held an interest in Chinese affairs.
U.S.-China Wars
China’s “wars with the United States are having a negative effect on economic activity,” Dalio wrote in a commentary on LinkedIn.
“The United States and China are now in a trade war, a technology war, a geopolitical influence war, and a capital/economic war, and they are now dangerously close to a military war.”
Dalio isn’t the only one disturbed by these developments. “This is scaring just about everyone, which is paralyzing activity, leading to the inefficient building of self-sufficiency in many ways, which is economically costly,” he said.
“Foreigner fears of what China, or more likely the United States, might do are adversely affecting investing and producing in China. Just the possibility of more intense war with the United States is having detrimental effects on the world.”
There are parallels to what has happened to the U.S. economic relationship with Russia, Dalio said.
“Imagine if investing or producing in China or buying Chinese goods became politically like it is for doing these things with Russia,” he said.
“No one should doubt that that’s a possibility, even if the U.S. government doesn’t make it happen. Because of this possibility, companies are shifting production to other countries like India, Vietnam, and Mexico and investors are doing the same.”
Trouble for Taiwan
As for Taiwan, “I have heard that in a new Republican-controlled House there is some possibility there will be a bill passed supporting independence, which would for the Chinese be tantamount to a declaration of war,” Dalio said.
That would “very likely lead to some sort of military conflict with China,” Dalio said. “The fact that this is a possibility, whether or not it materializes, is leading to damaging consequences.”
The consequences are particularly damaging in the economic sphere, Dalio said. “The mere perception that military war is a possibility has a negative effect on markets and economic activity,” he said.
“Obviously the reality of it would be disastrous. The good thing is that sensible people, who are still most people in power, understand that this would be terrible.”
