Billionaire Investor Ray Dalio Warns China: Address Debt Or Face A 'Lost Decade'

Ray Dalio, the billionaire founder of Bridgewater Associates, has cautioned that China could face a “lost decade” if it doesn’t address its debt issues.

What Happened: Dalio echoed Chinese President Xi Jinping‘s prediction of a “100-year period of unprecedented change” and advised China to manage its debt problem in a post on LinkedIn.

He also highlighted the potential for a “100-year big storm” due to high debt, wealth disparities, global power conflicts, disruptive technological changes, and environmental shifts.

Dalio suggested that the ongoing tensions between the U.S. and China are prompting foreign investors to diversify or leave China, making it difficult for the country to attract investments. He warned that the likelihood of a war within the next decade is high without resolving these economic and cultural conflicts.

"When there is a lot of debt and big wealth gaps at the same time as there are great domestic and international power conflicts, and/or great disruptive changes in nature, and great changes in technology, there is an increased likelihood of a ‘100-year big storm,'" he wrote.

See Also: Apple’s Struggles In China Are ‘Less About Apple And More About A Much Bigger Geopolitical Kerfuffle,’ Says Former Bumble Advisor: ‘Solid Business That Has Slowed’

The investor, who has a history of engaging with Chinese officials and has expressed admiration for some of Beijing’s economic policies, recommended that China deleverage and ease its monetary policy. However, he acknowledged that this would be challenging and politically risky.

"No one knows how far the pendulum will swing back toward the more Maoist/Marxist ways of doing things," Dalio wrote. "The impediment is that communicating more directly is not the Chinese leadership's traditional way of doing things, which, as China goes back toward the more traditional ways of doing things, is understandable."

Why It Matters: China’s economic future has been a topic of concern for several experts. Earlier in March, prominent economist Mohamed El-Erian advised investors to treat China as a short-term speculation rather than a long-term bet. He pointed out that foreign investors had withdrawn approximately $7 trillion since 2021, indicating a possible permanent shift.

Despite these concerns, President Xi Jinping has been making efforts to mend China-US business ties by meeting with American business leaders in Beijing. This comes at a time when China is grappling with a $7 trillion stock decline and soaring debt levels and real estate collapses.

Despite the economic uncertainty, a prominent strategist has suggested that Chinese stock valuations are way too low.

Read Next: China Warns Of ‘Crossroads’ In Relations With Philippines Amid Escalating Tensions Over Maritime Disputes

Photo courtesy: World Economic Forum On Flickr