The Sleeping Giant Stirs: China and Risk
“China is a sleeping giant. Let her sleep, for when she wakes she will move the world.” - Napoleon Bonaparte
Bridgewater’s billionaire investor Ray Dalio has been visiting China since 1984. During his first visit, he was told that China had big plans to expand and grow rapidly. Dalio has credited the country’s character and creativity as the driving force behind what he has described as the “greatest economic miracle of all time.”
From the mid 80s to now, China’s per capita income has increased by 26 times. The country’s share of the world’s GDP has gone from 2% to 22% (putting it in comparable standing with the United States). Life expectancy in China has increased by 10 years and the poverty rate dropped from 88% to 1%.
Dalio speaks at length about China’s growing momentum reflecting that of other empires that have dominated the world stage for a while. Many of China’s advancements in technology, military power, output and financial matters mirror those of the Dutch empire, the empire of Great Britain, and the dominance of the United States.
If you could choose to invest with a growing empire like Great Britain during the industrial revolution, would you do it? China currently seems like a solid opportunity for investors to ride a large wave. If there was a traditional war fought, that could disrupt these predictions but that seems unlikely. Dalio supposes that China will evolve and shift more of the supply chains and big players in the global order around.
Dalio claims that the notion of China as a risky investment is perhaps misguided. Many major standards of investing can be classified as risky in the current climate. By not keeping up with the technological advancements of other nations and with monetary policy issues, Europe has become risky. The United States and the conflict between socialism and capitalism within it alongside the western world’s central banks being ineffective with their monetary policy tools has made them risky. China has its own risks in the same way as everything else and is “less or no more risky than in totality than other markets.”
Dalio says that not investing in China may be more risky than many decisions investors regularly make.
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