Ray Dalio on Potential US-China War and Rise of China
In this article, we discuss Ray Dalio on potential US China war and rise of China. If you want to skip our detailed discussion on the US China war and rise of China, head directly to Top 5 Chinese Stocks Bridgewater Associates is Selling.
America's position as a globally dominant force is under threat. Divisive politics, increasing social unrest, escalating debt problems, and widening wealth gap are some of the challenges the biggest economy in the world is facing. Billionaire investor Ray Dalio believes China's role and influence are growing and the country could pose significant challenges to the US in the near future.
The founder of the world's largest hedge fund, Bridgewater Associates, expects the Chinese Yuan to become the global reserve currency sooner than most people expect. The hedge fund manager expects net worldwide trade and financial transactions to be denominated in the Yuan in the coming years as most economies worldwide lose touch with the dollar.
"I think China is going to be a big power for the foreseeable future. I think the basic picture in China, the United States the emergence of India, the world order is going to change in a profound way," Dalio said in the All-In Summit by All-In Podcast.
Effects of US-China Trade Wars on Companies
The collapse of the US and its currency, the greenback, would not be something new as it has occurred over the years with the rise and fall of various empires. The rise and fall of the Dutch and the British Empire paved the way for the US Empire, which has been the dominant force for decades. According to Dalio, the US Empire appears to have peaked, paving the way for the Chinese empire, which has been growing in strength.
As the dollar continues to lose its clout and the world is dividing into competing economic blocs, China stands to be one of the biggest winners. Nevertheless, the Chinese economy also faces the risk of crumbling amid growing tensions between Beijing and Washington.
The US-China trade war started during former President Trump's tenure, resulting in trade tariffs, which have significantly affected both economies. The US-China trade war raised tariffs on about $450 billion in bilateral trade, marking a turning point in globalization. The tariffs that the US imposed impacted 18% of imports and 2.6% of its GDP. On the other hand, Chinese retaliation impacted 11% of its imports, approximately 3.6% of its GDP.
The conflict's magnitude significantly affected companies that do business with the two countries. The trade war prevented Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) from producing advanced chips for Huawei, its biggest customer at the time. TSMC is the world's largest and most critical chip manufacturer, producing most of the chips used in the US and China
Taiwan Semiconductor Manufacturing Company Limited shares plunged following the escalation of the US-China trade war that triggered trade tariffs from the two nations. The stock would tumble to lows of $36 as the tensions between the two superpowers threatened its core business of supplying chips to some of the biggest companies in the world. The stock would receive a boost in 2022 as Berkshire Hathaway disclosed a $4.1 billion stake in the company.
Semiconductor Manufacturing International Corporation (SMIC) also plunged by more than 20% amid reports that the Commerce Department planned to add it to the blacklist of companies that US suppliers require special permission to deal with. Micron is another chip giant hit hard by the increasing tensions between the US and China over semiconductor technology.
Chip giants are not the only companies hit hard as geopolitical tensions between the US and China rise to alarming levels. Recently, Apple stock plunged following reports that Beijing had banned the use of the company's phone by state officials.
Amid the repercussions of escalating tensions, Dalio believes China has what it takes to be a dominant force for the foreseeable future as the US looks more like a late-stage empire. Massive debt, far-flung military wars, social and economic insecurities, and internal divisions are some of the challenges facing the US economy, threatening its supremacy as China remains on the ascendancy.
While the US Empire has appeared to be in decline in every sense, it's continued to make waves with key technological innovations that have helped shrug off the turmoil. However, Dalio believes more than technological innovations might be needed to save the empire, given the myriad of challenges on the side.
Ray Dalio of Bridgewater Associates
"We as a society in aggregate are spending a lot more money than we are earning it. So if we are doing such a good job on that technology why is that happening. When you look at the debt, do you want to own the debt? Those who don't want to own it then you have a financial problem. When you have financial problem at the same time you have wealth gap and populism that's a dangerous combination," Dalio said.
Even as the US dominance continues to fade and the greenback's importance slips in global trade, Dalio is only partially bought into China's long-term prospects. While he still controls about $3 billion in China's businesses, he believes the country's economy needs a massive debt restructuring.
According to the International Monetary Fund, China's debt has more than doubled to over $9.3 trillion. The billionaire investor believes the country's economy could cause a major headache across the globe, especially with the embattled property market amid sinking house prices.
Our Methodology
Ray Dalio, the founder of Bridgewater Associates, one of the largest investment firms with about $195 billion in assets, left his official leading role last year to follow his passions and share his wisdom. He still has a big impact on Bridgewater's investments as a board member and a mentor. We looked at the Q2 2023 portfolio of Ray Dalio’s Bridgewater Associates and selected Chinese stocks that Ray Dalio's fund either sold out completely or reduced its stakes in during the period.
Ray Dalio Selling Chinese Stocks Despite His Long-Term Bullish Outlook on the Country
23. Zhihu Inc. (NYSE:ZH)
Number of Hedge Fund Holders: 7
Zhihu Inc. (NYSE:ZH) is a Chinese online community for solutions, decisions, inspiration, and fun. Bridgewater Associates sold off its entire holdings in Zhihu Inc. (NYSE:ZH) during the second quarter of 2023.
7 of the 910 hedge funds part of Insider Monkey’s database had invested in Zhihu Inc. (NYSE:ZH) as of Q2 2023.
22. Hutchison China MediTech Limited (NASDAQ:HCM)
Number of Hedge Fund Holders: 8
Hutchison China MediTech Limited (NASDAQ:HCM) is a biotech company that makes cancer and immunology drugs. It has three approved and marketed products in China: Elunate (fruquintinib), Surufatinib, and Savolitinibht.
At the end of June, Bridgewater Associates owned 11,871 shares in Hutchison China MediTech Limited (NASDAQ:HCM) worth $142,452. The hedge fund had trimmed its stake in the firm by 90% by June compared to January 2023. Insider Monkey’s second quarter of 2023 survey of 910 hedge funds revealed that 8 had bought Hutchison China MediTech Limited (NASDAQ:HCM)’s shares.
21. I-Mab (NASDAQ:IMAB)
Number of Hedge Fund Holders: 8
I-Mab (NASDAQ:IMAB) is a biotech company that works on novel biologics for cancer and immunology. In 2021 Q2, Bridgewater Associates first acquired 33,254 shares of I-Mab (NASDAQ:IMAB). However, in 2023 Q2, the fund sold all of its shares in the company.
At the end of the second quarter of 2023, 8 hedge funds in the database of Insider Monkey held stakes in I-Mab (NASDAQ:IMAB), compared to 10 in the previous quarter.
20. Baozun Inc. (NASDAQ:BZUN)
Number of Hedge Fund Holders: 8
Baozun Inc. (NASDAQ:BZUN) is a Chinese company that provides e-commerce solutions to brand partners in China. It offers services such as online store design and setup, operations, marketing campaigns, customer services, warehousing, and order fulfillment.
Bridgewater Associates acquired a stake in Baozun Inc. (NASDAQ:BZUN) in Q3 2019. However, the fund offloaded the shares in the second quarter of 2023. Insider Monkey's Q2 2023 survey of 910 hedge funds outlined that 8 had invested in Baozun Inc. (NASDAQ:BZUN).
19. Kingsoft Cloud Holdings Limited (NASDAQ:KC)
Number of Hedge Fund Holders: 8
Kingsoft Cloud Holdings Limited (NASDAQ:KC) is a company that provides cloud storage and cloud computation services in China and other regions. It offers a cloud platform comprising cloud infrastructure, products, and industry-specific solutions for public cloud, enterprise cloud, and AIoT cloud services.
Bridgewater Associates first invested in Kingsoft Cloud Holdings Limited (NASDAQ:KC) in Q2 2021. However, it offloaded 96% stake in Q2 2023. At the end of the second quarter of 2023, 8 hedge funds in the database of Insider Monkey held stakes in Kingsoft Cloud Holdings Limited (NASDAQ:KC), up from 7 in the preceding quarter.
18. Noah Holdings Limited (NYSE:NOAH)
Number of Hedge Fund Holders: 9
Noah Holdings Limited (NYSE:NOAH) is a company that provides wealth management and asset allocation services for high-net-worth individuals and enterprises in China. It has a dual listing on the New York Stock Exchange and the Hong Kong Stock Exchange. In the second quarter of 2023, Bridgewater Associates sold off a 39% stake in Noah Holdings Limited (NYSE:NOAH).
Out of the 910 hedge funds tracked by Insider Monkey as of the end of Q2 2023, 9 hedge funds had stakes in Noah Holdings Limited (NYSE:NOAH).
17. Dada Nexus Limited (NASDAQ:DADA)
Number of Hedge Fund Holders: 11
Dada Nexus Limited (NASDAQ:DADA) is a Chinese company that operates a platform for local on-demand retail and delivery in China. It has two main products: JD-Daojia (JDDJ), which is a local on-demand retail platform that connects consumers with retailers and brand owners, and Dada Now, which is a local on-demand delivery platform that provides fast and reliable delivery services for merchants and individual senders.
Bridgewater Associates took a new stake in Dada Nexus Limited (NASDAQ:DADA) in Q2 2021. However, it eliminated the entire stake in the second quarter of 2023. During the same time period, 11 of the 910 hedge funds polled by Insider Monkey had also invested in Dada Nexus Limited (NASDAQ:DADA).
16. 360 DigiTech, Inc. (NASDAQ:QFIN)
Number of Hedge Fund Holders: 11
360 DigiTech, Inc. (NASDAQ:QFIN) is a company that provides credit-tech services to financial institutions and consumers in China. The company formerly 360 DigiTech, Inc. became Qifu Technology, Inc. on March 31, 2023.
Bridgewater Associates bought into the company in 2021. It purchased 53,592 shares of 360 DigiTech, Inc. (NASDAQ:QFIN), valued at about $2.24 million in the second quarter of 2021. However, the fund started shedding the shares in early 2023 and finally exited in Q2 2023.
As of the end of the second quarter of 2023, 11 hedge funds had stakes in 360 DigiTech, Inc. (NASDAQ:QFIN).
15. HUYA Inc. (NYSE:HUYA)
Number of Hedge Fund Holders: 11
HUYA Inc. (NYSE:HUYA) is a Chinese game live-streaming community. Bridgewater Associates initially acquired a position in the company during Q2 2020 and subsequently sold its stake in HUYA Inc. (NYSE:HUYA) during Q2 2023.
At the end of the second quarter of 2023, 11 hedge funds in the database of Insider Monkey held stakes in HUYA Inc. (NYSE:HUYA), down from 13 in the preceding quarter.
14. Gaotu Techedu Inc. (NYSE:GOTU)
Number of Hedge Fund Holders: 12
Gaotu Techedu Inc. (NYSE:GOTU) is a Chinese company that provides online tutoring services for K-12 students, as well as foreign language and professional training courses for adults. Bridgewater Associates maintained a position in Gaotu Techedu Inc. (NYSE:GOTU) since the third quarter of 2020. However, in the second quarter of 2023, the hedge fund sold its entire stake in Gaotu Techedu Inc.
Overall, a total of 12 hedge funds were bullish on Gaotu Techedu Inc. (NYSE:GOTU) in Q2 2023, the same as in the prior quarter.
13. DouYu International Holdings Limited (NASDAQ:DOYU)
Number of Hedge Fund Holders: 13
Bridgewater Associates bought into DouYu International Holdings Limited (NASDAQ:DOYU) in Q4 2020 when the stock was trading at around $13.54 per share. Douyu International Holdings Ltd (DOYU) is a Chinese company operating a game-centric live-streaming platform and pioneering the eSports value chain. The fund held 28,154 shares of DouYu International Holdings Limited (NASDAQ:DOYU) at the end of Q1 2023. It later sold the entire stake in Q2 2023.
Insider Monkey’s Q2 2023 survey of 910 hedge funds revealed that 13 had invested in DouYu International Holdings Limited (NASDAQ:DOYU).
12. Lufax Holding Ltd (NYSE:LU)
Number of Hedge Fund Holders: 16
Lufax Holding Ltd (NYSE:LU) is a financial service empowering institution for small and micro businesses in China, and an associate of Ping An Group. Bridgewater Associates has trimmed its stake in the company by 79% in the second quarter of this year. At the end of June, the fund owned 3.14 million shares in the company worth over $4.49 million, representing 0.02% of the portfolio.
Insider Monkey’s database of 910 hedge funds shows that 16 hedge funds had stakes in Lufax Holding Ltd (NYSE:LU) at the end of Q2 2023.
11. TAL Education Group (NYSE:TAL)
Number of Hedge Fund Holders: 16
TAL Education Group (NYSE:TAL) is a Chinese company that offers after-school tutoring for K-12 students in various subjects. By the end of June this year, Bridgewater Associates had trimmed stake in TAL Education Group (NYSE:TAL) by 69% compared to the holding at the end of the first quarter of 2023. Still, the fund holds a $6.52 million stake in the company.
Out of the 910 hedge funds tracked by Insider Monkey as of the end of Q2 2023, 16 hedge funds had stakes in TAL Education Group (NYSE:TAL).
10. BeiGene, Ltd. (NASDAQ:BGNE)
Number of Hedge Fund Holders: 17
BeiGene, Ltd. (NASDAQ:BGNE) is a company that develops and sells drugs for cancer treatment. It has four approved drugs: Brukinsa, Tislelizumab, Pamiparib, and Xgeva. At the end of June this year, Bridgewater Associates owned 12,118 shares in the company that were worth $2.16 million, representing 0.01% of the portfolio. The fund had trimmed stake in the firm by 91% in the second quarter of 2023.
According to Insider Monkey’s database of 910 hedge funds, 17 hedge funds have stakes in BeiGene, Ltd. (NASDAQ:BGNE) as of the end of the second quarter of 2023, down from 16 funds in the previous quarter.
9. XPeng Inc. (NYSE:XPEV)
Number of Hedge Fund Holders: 17
XPeng Inc. (NYSE:XPEV) is a Chinese company that makes smart electric vehicles. It has two main models: the G3 SUV and the P7 sedan. Xpeng is one of the players in the Chinese EV market, competing with Tesla, Nio, Li Auto, and others.
Bridgewater Associates reduced its exposure to one of the Chinese stocks in its portfolio by a huge amount in Q2. The holding company shed 804,861 shares in XPeng Inc. (NYSE:XPEV). The fund first bought XPeng Inc. in the third quarter of 2020 and quickly built on the position over the following two years.
As of the end of the second quarter of 2023, 17 hedge funds tracked by Insider Monkey had stakes in XPeng Inc. (NYSE:XPEV), down from 20 funds in the previous quarter.
8. GDS Holdings Limited (NASDAQ:GDS)
Number of Hedge Fund Holders: 19
GDS Holdings Limited (NASDAQ:GDS) is a company that develops and operates high-performance data centers in China and Southeast Asia. It provides colocation, managed, and consulting services to its customers, who are mainly cloud service providers, internet companies, financial institutions, and multinational corporations.
Bridgewater Associates bought $266,000 worth of shares in GDS Holdings Limited (NASDAQ:GDS) in 2018 but offloaded the entire stake by the end of Q2 2023. At the end of the second quarter of 2023, 19 hedge funds in the database of Insider Monkey held stakes in GDS Holdings Limited (NASDAQ:GDS), compared to 22 in the previous quarter.
7. VNET Group, Inc. (NASDAQ:VNET)
Number of Hedge Fund Holders: 21
VNET Group, Inc. (NASDAQ:VNET) is a Chinese provider of data center and cloud services for internet infrastructure.
Bridgewater Associates began purchasing VNET Group, Inc. (NASDAQ:VNET) shares in Q1 2021 and steadily increased its stake to 51,900 shares by Q1 2023. However, the fund divested its entire position in the company during Q2 2023. Insider Monkey’s 910 hedge fund study for the same period revealed that 21 had held a stake in VNET Group, Inc. (NASDAQ:VNET).
6. Kanzhun Limited (NASDAQ:BZ)
Number of Hedge Fund Holders: 22
Kanzhun Limited (NASDAQ:BZ) is a Chinese online recruitment company that runs the BOSS Zhipin app. It connects job seekers and employers directly and efficiently. As of the end of the second of 2023, 22 hedge funds had stakes in Kanzhun Limited (NASDAQ:BZ), down from 27 in the previous quarter.
Securities filings for Q2 2023 reveal that Bridgewater Associates held 819,037 shares of Kanzhun Limited (NASDAQ:BZ) worth approximately $12.33 million. However, the fund cut its stake in the company by 53% in the June quarter.
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Disclosure: None. Ray Dalio on Potential US China War and Rise of China is originally published on Insider Monkey.
