Ray Dalio Says US-China Relations Are on the ‘Brink of Red Lines'

Jacob Gu
·2 min read
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(Bloomberg) -- Washington’s restrictions on advanced semiconductor exports to China are similar to the petroleum ban it imposed against Japan prior to the outbreak of war in 1941, according to Ray Dalio, founder of Bridgewater Associates.

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“The reason in World War II — war with Japan — you had the cutting off of the oil and then sanctioning them, taking their payments,” Dalio told Bloomberg TV’s David Westin in a conversation at the Greenwich Economic Forum. Now, there’s a “much similar situation. Chip’s like oil back then.”

Dalio has long nurtured relations with Chinese officials, expressed admiration for some of Beijing’s economic policies and built business for his firm in China. He has also been consistent in warning about the risk of conflict between the world’s two largest economies.

In April, he wrote in a LinkedIn post that tensions could worsen as the US heads toward the presidential election in November 2024.

“US-China relations are, in a number of areas, on the brink of red lines,” he said on Tuesday. “So in another words, these are irreconcilable differences, and they are right on the brink.” Dalio indicated Taiwan is at the center of the many “irreconcilable issues” between the US and China.

“The breaking point is if the United States said ‘we are in favor of the independence of Taiwan.’ That’s the equivalent of declaration of war,” he said. “And because of our political issues now, internally, you are going to be likely to push that — because of the fact that many in the Congress and so on would say ‘we’ll defend Taiwan.’”

Taiwan, which China views as its territory and a top national security priority, will hold its own presidential election in January 2024 — 10 months before the US one.

At the same time, Dalio doesn’t see a war between the US and China as unavoidable. “Neither country wants to go to war. Everybody’s afraid of what that war would be like because it would be devastating economically and politically.”

Dalio built one of the world’s biggest hedge funds through focusing on economic trends such as inflation, interest rates and foreign-exchange rates before giving up control of Bridgewater last year.

--With assistance from Joe Carroll.

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