Ray Dalio, the founder of hedge fund Bridgewater Associates, has raised concerns about China’s growing debt burden and the potential consequences it could have on the country’s economy. In a recent blog post on LinkedIn, Dalio warned Chinese leader Xi Jinping about the risks of not addressing the debt issue, stating that China could face a lost decade similar to Japan’s economic stagnation in the 1990s.
Dalio emphasized the need for China to take immediate action to mitigate its debt imbalances and suggested that relaxing monetary policy could help guide the Chinese economy through these challenging times. He pointed out that addressing the debt problem should have been done two years ago to prevent a lost decade for China.
One of the key areas Dalio highlighted for China to focus on is the improvement of elderly care services and the raising of the retirement age. He also mentioned the need to address conflicts related to income inequality and values, as well as the escalating tension between China and the United States. Dalio stressed the importance of winning the technological war to secure economic, geopolitical, and military advantages.
While acknowledging the benefits of capitalism in driving periods of prosperity, Dalio cautioned against the risks of accumulating excessive debt and widening wealth gaps. He noted that when the debt burden becomes unsustainable and inequality grows, it could disrupt the economic cycle.
The combination of China’s mounting debt pressure, geopolitical conflicts, technological advancements, and natural disasters has created a challenging environment for the country’s economy. Dalio referred to this situation as a “once-in-a-century storm” that China must navigate carefully.
As of the latest data, Hong Kong’s Hang Seng Index has seen a decline of 3.8% year-to-date, while the S&P 500 has recorded a 10% increase this year, reaching a new record high. Dalio urged China to address its debt challenges promptly and effectively to avoid the potential consequences of a lost decade.
Please note that this article has been translated from MarketWatch, an independent source owned by Dow Jones, the parent company of The Wall Street Journal.