Billionaire Ray Dalio Says U.S. Needs a Dose of China’s Common Prosperity
(Bloomberg) -- Ray Dalio, founder of the $150 billion investment firm Bridgewater Associates, urged countries including the U.S. to narrow their wealth gaps, while praising China’s drive for common prosperity.
President Xi Jinping’s push helps redistribute wealth and opportunities more equally among its population, allowing the economy to draw upon a wider talent pool, Dalio said at a UBS Group AG investment conference on Monday. The campaign is often misunderstood by international investors, who fear the country is returning to the communist model under Chairman Mao Zedong, he added.
“First you get rich, then you make a point of distributing those opportunities in a more equal way,” Dalio, known as a long-time China enthusiast, said via video link. “The U.S., through its own system, needs more common prosperity, and a lot of other countries do.”
Dalio’s comments come as his support for the nation and its government recently brought criticism from politicians and caused tension with his own former chief executive officer, David McCormick, who’s considering a Senate run. In China, the move to address the country’s wide and persistent wealth gap has involved regulators targeting the tech sector in particular, alarming investors.
Authorities are also trying to rein in what the government sees as the excesses of society, including rabid celebrity fandom, academic cram schools and video gaming. The MSCI China Index slumped nearly 23% last year, the worst decline since 2008, with investor concerns about the political and regulatory environment compounded by Covid-19.
For almost 40 years, Dalio has spoken of his fascination with China, and has been a vocal -- and at times controversial -- booster of the nation and its government. In 1995, Dalio sent his son Matt, then 11, to live and attend school in Beijing for a year.
“You don’t know where the top talent is going to come from. It’s just as likely to come from poor people, disadvantaged people as it is from the most superbly groomed people,” Dalio said of the Chinese leadership’s common prosperity drive. “So you draw upon that talent, and you make a better economy more prosperous and you create a fairer system.”
The billionaire in October said he would be open to paying more tax, if he knew the money would be put to good use, such as by promoting equal opportunity and greater productivity.
China’s relentless regulatory crackdown has divided Wall Street, fueling speculation about where the axe might fall next. George Soros has criticized Xi’s policies and said in a Wall Street Journal op-ed last year that “pouring billions of dollars into China now is a tragic mistake.” Guggenheim Partners’ global chief investment officer Scott Minerd said in October that China is “uninvestable.”
By contrast, Dalio said the U.S. is a more risky place to invest, using criteria such as an economy’s income generation versus expenses, assets versus liabilities, as well as a country’s internal order and likelihood of external conflicts.
“What we see by most of those is that the U.S is encountering more of those risky elements, also other things like education levels, competitive advantages and so on are on decline,” he said. While technology is still a bright spot for the U.S., the rate of change is slower than China, he added.
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Bridgewater has been managing Chinese state money since 1993, including about $5 billion for the sovereign wealth fund China Investment Corp. and the State Administration of Foreign Exchange.
In November, Bridgewater raised 8 billion yuan ($1.3 billion) for a new private fund in China, making it the largest global hedge fund player in the country.
Dalio caused a stir at home with his China comments in a Nov. 30 CNBC interview, leading McCormick to tell staff he disagreed with the billionaire’s views.
“Should I not invest in the United States because of our own human rights issues and other things?” Dalio said at the time. “As a top-down country,” he added of China, “they behave like a strict parent.”
Bridgewater’s flagship Pure Alpha II fund returned about 8% last year, saved by a strong December. Like many peers, its macro hedge fund struggled for the past decade, gaining an annualized 1.6% for the 10 years through November. The firm lost 12.6% in 2020, and several institutional clients pulled their money.
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