For investors skittish about China investments after the public debut of Jack Ma’s Ant Group was foiled by Beijing’s regulators, Ray Dalio has one message: Don’t be.
Diversifying into China is worth the risk, the Bridgewater Associates founder said at a webinar hosted this week by the National Committee on United States-China Relations. About 1,500 people tuned in to hear Dalio’s keynote speech at the China Town Hall.
“The Chinese are doing things to build confidence,” Dalio told moderator Stephen Orlins, president of the group. “They can undermine it, but I think that the diversification outweighs the risks.”
The hedge fund leader has been a proponent of China investments for years. China, which makes up about 17% of the world’s gross domestic product (GDP) and roughly a 4% share of global equity markets, has been opening its doors more and more to foreign investors.
But the state-run government delivered a blow to business and investor confidence earlier this month when it pulled the plug on the world’s largest initial public offering (IPO) just days before its debut.
Yanking the Ant offering was a public dressing down of Ma, a strong supporter of open markets, after he lobbed critical remarks against the country’s financial regulators. For Western investors, it highlighted the risk of investing in a country where the state seeks to keep firm control over the private sector.
“At one point in my life, I was an investment banker who did IPOs,” said Orlins, previously managing director at Carlyle Group Asia. “If three days before an IPO, the deal was pulled, wow, that probably would have been the end of my career at that point.”
Still, Dalio defended the regulators’ decision. Skittish investors will have to learn how to navigate dealings with the state-operated capitalistic system, particularly as the world’s second largest economy expands its grip over the capital markets.
“I’ve had a lot of dealings with Chinese financial regulators and I could say that, generally speaking—not generally speaking, almost always speaking—I found them to be reasonable, caring, and highly informed people, who are now in an environment which is changing at an extremely fast pace,” Dalio said.
“Ant is a whole new concept, innovative concept, in terms of banking, and almost could replace or threaten the banking system in China. And it hasn’t yet been properly established in terms of regulatory review,” he continued.
“I think it was progressing too fast, and it had to be clear as to who the authority was,” he added.
Representatives for Bridgewater did not respond to a request for additional comment.
Dalio said investors should continue to engage with Chinese investments, whether state-owned or private, particularly as the country is poised to debut more mega-IPOs. This is a feat for China, given the challenges with the pandemic this year. TikTok’s parent company, ByteDance, is set for its public debut with a $100 billion valuation. Ride-sharing company Didi Chuxing has a $58 billion valuation. “There’s a plethora of wonderful companies,” Dalio said.
Bridgewater, which has spent more than 30 years engaging with China, has been expanding its presence in the country. It has offices in Beijing and Shanghai and has increased Chinese holdings in its All Weather global portfolio. In 2018, the hedge fund launched an All Weather China product specifically for Chinese holdings.
As of May, when it filed its most recent public disclosure, Bridgewater manages about $138 billion, a $25 billion drop from the $163 billion it managed in February before the market crash. Bridgewater lost about 15% in assets under management during the March and April downturn.
In his appearance, Dalio was also promoting his book The Changing World Order: Why Nations Succeed and Fail, which will be released this winter.
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