In Depth

Bridgewater Founder Urges Markets Not to Misinterpret Policy Moves in China

The billionaire investor viewed the recent policy changes as“wiggles”, rather than the reversal of the four-decade trend of China's usage of capital markets to foster development.

Billionaire investor Ray Dalio has called on other Western investors not to misconstrue recent policy moves in China as “anti-capitalist” in a note on his LinkedIn account.

Earlier in July, the Chinese government launched a series of investigations into Didi Chuxing’s cybersecurity and data privacy in the wake of its low-profile initial public offering on the New York Stock Exchange. It also announced education tutoring entities must be non-profit, triggering a free fall of the shares of tutoring companies, including New Oriental.

Dalio, who is Co-Chief Investment Officer & Co-Chairman of Bridgewater Associates, L.P., said that Western observers had a number of similar misinterpretations, including the currency plunge in 2015-2016 after China’s central bank widened the band for the Chinese currency’s exchange rate.

“They interpret moves like these two recent ones as the Communist Party leaders showing their true anti-capitalist stripes even though the trend over the last 40 years has clearly been so strongly toward developing a market economy with capital markets, with entrepreneurs and capitalists becoming rich,” argued Dalio, adding that accordingly, they’ve missed out on opportunities in China.

He viewed the recent policy changes as “wiggles”, rather than the reversal of the 4-decade trend of China’s “usage of capital markets to foster development”.

Regarding Didi Chuxing, he noted the Chinese ride-hailing giant, with Softbank and Uber as its shareholders, had ignored a signal flashed by the Chinese regulator to address data issues before their potential IPO.

Dalio interpreted the order to convert education companies into non-profits as the government’s effort to reduce “educational inequality” in China and “financial burdens” on those who are desperate to give their children after-school tutoring.

The high-profile investor said Chinese regulators believe those moves are good for the country even if shareholders don’t like them.

The same state interventions happened “many times in many capitalist markets”, he said, adding that the fiscal and monetary policy interventions in the United States and other developed markets even “dwarf the Chinese government interventions in its markets.”

He said capitalism in China serves the interests of most people and that policymakers won’t let “rich capitalists” stand in the way of doing what the government believes is best for most people of the country.

He recommended those in the capital markets and capitalists should “understand their subordinate places in the system” and cautioned the rich not to mistake their wealth as the “power for determining how things will go”.

Dalio also asked investors to heed recent U.S. regulatory changes as a result of global geopolitical shifts, including stricter disclosure requirements for Chinese IPO applicants and U.S.-listed Chinese companies and a ban on U.S. pension funds investing in Chinese markets.

(Source: TMTPOST, Author: SunHuixia)

Shirley Huang

Shirley Huang is good at capturing the latest technological developments. Dedicated to collecting and analyzing pieces of news. Previously, she studied at Curtin University, Western Australia.
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