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After Sparks Fly At Bridgewater, Dalio 'Clarifies' His China Comments

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by Tyler Durden
Sunday, Dec 05, 2021 - 02:42 PM

Update (1440ET): Amid the shitstorm (both external in the world and internal to Bridgewater) ignited by Ray Dalio's comments on the equivalence of Communist China's human rights abuses and America, the founder of the world's largest hedge fund decided to put pen to digital paper to explain himself... well to explain that it's all our faults for misunderstanding him...

Clarifying My Recent China Comments

Now that things have calmed down I want to clarify what I meant when I sloppily answered a question about China from Andrew Ross Sorkin that created a misunderstanding of my views. I assure you that I didn’t mean to convey that human rights aren’t important because I certainly believe they are and I didn’t mean to convey that the US and China deal with these issues similarly because they certainly don’t. I am an American who has lived my whole life in the US, experiencing the American Dream, and I believe in our system. At the same time, I have spent more than half my life in contact with China which has helped me understand their system as well. In trying to answer Andrew's questions, I was attempting to explain what a Chinese leader told me about how they think about governing – about how Confucianism is based on the family and that extends into their governance, which is a more autocratic approach that is like a strict parent. I was not expressing my own opinion or endorsing that approach. My overriding objective is to help understanding. Understanding and agreeing are two different things, and that’s what was lost in the interview. I'm sorry my answer lacked that nuance and caused confusion.

I also want to clarify how I weigh the pros and cons of investing in China in light of the human rights issue. This is not a challenge that Bridgewater alone faces. There are more than 40,000 investors and an untold numbers of banks and companies from the US and other countries facing the same issue. While commercial considerations are part of the equation, they are not paramount. It is a reality that many Americans and Chinese are intertwined, and that separating them would be terrible for just about everyone. Besides the direct functional synergies of producing things together that benefit Americans, Chinese, and the rest of the world, these connections produce mutual understandings and mutual influences that promote peace and progress globally. So, we have responsibilities to different constituencies that we have to balance, creating complex nuances for a broad number of stakeholders. In Bridgewater's case, we invest in about 40 countries, and our clients rely on us to invest in the best possible ways in all the countries that make sense from an investment standpoint. For Bridgewater, and for all of those who deal with China and many other countries, there are many other geopolitical and regulatory issues that are constantly changing and are beyond our capacity to weigh against the responsibilities we have to our clients. We want to get these things right, not just based on what we think, but, much more importantly, based on what the regulators think is right. These considerations lead us to rely most heavily on the guidance of both the US government and the governments of the countries we are in.  

Having said all this, what I think and what Bridgewater does are of minuscule importance relative to the rapidly growing risk of US war with China due to misunderstandings and inclinations to fight, so I hope that thoughtful attention will be paid to that issue and that mutual understandings will increase and inclinations to fight will diminish. I have comprehensively expressed my concerns about what is happening now and the historical precedents for it in my book, so these thoughts are available to you if you care to read them. I should point out that they are not just my own – I know that speaking out publicly on these issues can be uncomfortable, and there are many like-minded thought leaders who share these views, even if they don't speak about them as openly as I do.

So that's it then - we're all just too dumb to understand the nuance in his statement that clearly laid out the fact that Dalio doesn't care what China does, he has money to make.

*  *  *

As we detailed earlier, American attitudes towards China remain extremely mixed (and apparently stratified by 'wealth'). As we first noted some time ago, Negative views of China have increased substantially since 2018: "Today, 67% of Americans have “cold” feelings toward China on a “feeling thermometer,” rating the country less than 50 on a 0 to 100 scale. This is up from just 46% who said the same in 2018."

The picture is very different on the corporate side of America with most recent examples including Jamie Dimon flip-flopping and bending the knee to Beijing about a 'joke', NBA and LeBron James ignoring Enes Kanter Freedom's warnings about Uyghur genocide, and Ray Dalio - founder of the world's largest hedge fund - who this week drew an odd equivalence between China and US when asked about investing in the communist nation amid human-rights' abuses:

“I look at the United States, and I say, well, what’s going on in the United States and should I not invest in the United States” because of “our own human-rights issues, or other things?”

This remark triggered both silence and outrage among the two pro/anti-China camps, and prompted Bridgewater CEO David McCormick, who also happens to be considering a US Senate run as a Republican candidate, to make it clear that he disagrees with Dalio's views.

During a company-wide call, McCormick addressed the controversial remarks that Dalio had made this week on television. As Bloomberg reports citing people with knowledge of the matter, McCormick told staff he's had lots of arguments about China over the years with Dalio and that he disagrees with the billionaire's views (not that it has stopped him from investing in China, that is).

The fact of the matter is that Dalio is not an idealist, but a pragmatic capitalist (who unlike so many of his Wall Street peers does not preach and moralize on the topic of China while doing precisely the opposite) and wants simply to put his capital to work in the place where it will garner the best return adjusted for risk. To him, it appears China is among those opportunities for growth - never mind the genocide, 'disappearances', totalitarianism, and increasingly weak property right. In other words, he is merely looking after his own and his investors interests.

Of course,  this 'Wall Street' perspective is verboten in a world of political correctness and SWJness, which makes Dalio's public expression of 'greed uber alles' all the more notable in a world seemingly tearing itself apart over wealth inequality, income inequality, outcome inequality... and willing to virtue-signal left, right, and center in order to achieve sainthood even as the money into China keeps flowing to a record degree!

As The Wall Street Journal writes, this is the sort of comment that sours Americans on Wall Street and opens executives to accusations of being “citizens of the world” before they are Americans. Mr. Dalio wants freedom to invest where he pleases, but if Wall Street titans convey contempt for America’s system of government, then voters will curtail their prerogatives through the political process.

Finally, do not forget that in November, Bridgewater raised 8 billion yuan ($1.3 billion) for a new private fund in China. That brought the firm’s total onshore assets under management to more than 10 billion yuan.

Meanwhile, most Wall Street firms are similarly investing aggressively in China, while turning a blind eye to China's epic human rights violations even as they continue to preach and lecture the world on what not to do in the US.

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