China’s economic growth is slowing down. As trade tensions with the U.S. drags on, China’s domestic stock market (SS) has crashed and its currency devalued. Despite all of that, Ray Dalio, the founder and co-chair of $160 billion Bridgewater Associates, is advising investors not to retreat.
The hedge fund titan strikes an extremely bullish tone on China during an interview published on Tuesday. Since 1984, Dalio has paid frequent visits to China and witnessed the economic leap there as China’s share of world GDP jumped from 2% to 22% in 2018. Now he is calling China “a comparable power of the United States” and urges investors to not miss the opportunity, despite intensifying trade tensions between the two countries.
“Would you have not wanted to invest with the Dutch in the Dutch empire? Would you have not wanted to invest in the industrial revolution and the British Empire? Would you have not wanted to invest in the United States and the United States empire? I think it's comparable,” said Dalio, adding that he believes China’s rise today resembles those business empires.
“In a nutshell, it's going to have the largest economy in the world, the most trade in the world, the most market capitalization in the world,” he said.
He characterized the trade conflict as “a natural evolutionary step” in the course of economic history as a rising power challenging an existing world power. The macro risks and fears have even created opportunities for investors, according to Dalio.
“If you wait for everything to be crystal clear, everything is going to be terrific, you'll pay a higher price than if you don't,” said Dalio. “So, yes I would say that now is the time. that the reason now is the time and that it's opening up now you could be early or you can be late.”
Diversification is crucial
Another reason investors should get into China is diversification, as the country goes head-to-head with the U.S. in key technology areas like AI and 5G.
“I believe that China is a competitor of the United States or Chinese businesses will be competitors of American businesses and other businesses around the world,” he said. “Therefore, you want to be, if you're diversified, having bets on both horses in the race,”
Dalio pointed to the stock market, bond market as well as venture capital as investment opportunities in China. China has pledged to further open its financial market for foreign players. MSCI, the index provider, has further increased China’s weighting in its flagship emerging markets index in February.
Dalio said the risks in China is “less or no more” than other markets. He acknowledges that China doesn’t have a regulatory system that is as advanced as developed countries and as liquid. But he argues the greater levels of inefficiency also provides an investment opportunity.
“I know it's very controversial particularly at this time to be very bullish on China. And I just want to let you know that I'm sincere,” said Dalio.
Watch the full Ray Dalio interview here:
Krystal Hu covers technology and China for Yahoo Finance. Follow her on Twitter.