Ray Dalio on Potential US-China War and Rise of China

Ruchi Gupta
15 min read

In This Article:

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

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