An article entitled “Don’t turn a blind eye to China’s rise in a changing world,” by Ray Dalio, founder of Bridgewater, was published on Oct. 23 on the Financial Times website, saying that China’s fundamentals are clearly more favorable from an objective comparison of China and the United States in terms of controlling the rate of new coronary pneumonia infections, advanced technology development, investment impact and other indicators. The full article is compiled below.
Every day we see China succeeding in extraordinary ways.
China has achieved the lowest rate of new coronary pneumonia infections in the world. Over the past year, China’s economy has grown by nearly 5 per cent without monetizing its debt, while all other major economies have contracted. Unlike the United States and many Western countries, China produces more than it consumes and has a balance of payments surplus. Nearly half of the world’s initial public offerings (IPOs) will take place in China this year, including Ant Group’s upcoming plan to raise more than $30 billion ($1.00 or $6.67 – our note), which is expected to be the world’s largest IPO ever. even Tesla’s best-selling The Model 3 car may soon be made entirely in China as well.
In the field of advanced technology, China now rivals the U.S., and will likely lead in five years. since 1984, China’s per capita income has increased more than 20 times, life expectancy has increased by 10 years, and the poverty rate has fallen to almost zero. All of this points to the enormous political, economic, and investment implications of China’s rise.
China’s economy is roughly the size of the United States, but is expanding at a much faster rate, so time is in China’s favor. China’s well-educated population is growing, and the number of science and engineering students in Chinese colleges and universities is about one-third of the world’s population, three times the U.S. share of the world’s population. China also generates and collects far more data for AI to process than any other country.
Finally, there are investment implications. As a global macro investor, I think a lot about where and how much I should invest, by looking at fundamentals and how others are laying it out. China has strong fundamentals and its assets are relatively attractively priced, while the world is under-owned in Chinese stocks and bonds. Foreign portfolios currently hold only 3% or less of Chinese assets, and the neutral percentage should be closer to 15%.
This bias is due, at least in part, to an anti-China bias. I think this is about to change. The Chinese market is opening up to foreigners, who now have access to at least 60% of the Chinese market, up from just 1% in 2015. The benchmark weighting of Chinese assets in the major indices is rising. As a result, I expect China to receive favorable capital inflows, which will support the yuan – the currency is now at a two-year high – as well as financial markets.
In the long run, nations rise and fall by timeless and universal truths. Simply put, the conditions for the rise of a great nation are that it is productive, financially secure, revenues exceed expenditures, and assets grow faster than debts. And these conditions are often met only when the citizens are well educated, hard-working, and civilized in their demeanor.
As I have documented in an ongoing study, China’s fundamentals are clearly more favourable when comparing China and the United States objectively using the above indicators.
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