China’s financial sector, yuan’s reserve status catching up with US, says Ray Dalio

Bridgewater Associates co-chairman Ray Dalio. Photo by Emily Hey. Nikkei Asian Review.

While China’s financial sector and the yuan’s reserve status are still lagging behind the U.S., this is changing rapidly, said Ray Dalio, founder and co-chairman of global hedge fund giant Bridgewater Associates LP.

China is now one of the world’s largest trading powers, but its currency makes up a small fraction of global reserves, world trade invoicing, and cross border lending, Dalio said at the Caixin Summit in Beijing on Saturday via video link. Meanwhile, the U.S. dollar accounts for over 50% of global reserves and trade invoicing, and about 60% of global lending.

Dalio presented a Bridgewater index that attempts to gauge each nation’s power by quantifying its currency’s reserve status, the strength of its financial sectors, competitiveness in world markets, share of global trade, economic output, education, innovation and technology, and military.

While China has rapidly risen to be a power comparable to the U.S., the yuan’s status and the country’s financial markets have not developed as much as some other aspects of the country’s economy, said the U.S. hedge fund founder.

However, Dalio said he expects the country’s strength in these areas to grow as it opens its financial markets to overseas participants. About 60% of all domestic assets are now “accessible to” foreign investors, up from just 1% in 2015, he said. China’s capital markets have also gotten bigger and more liquid, now accounting for around 15% of the world’s equity market in terms of market value, he added.

The billionaire investor said these changes have not only enabled his firm to set up investment funds in China and bring investors into Chinese markets, but also allowed Bridgewater to run an onshore fund for Chinese domestic investors. Originally founded in 1975, the company managed over $130 billion worth of assets across the globe as of April 30.

Since Dalio first visited China in 1984, the country’s per capita income has increased by 25 times, life expectancy has increased by 10 years, and the average number of years of education increased by about 80%, he said.

A lot has also changed in the U.S., he noted. The country reached the end of a long-term debt cycle when interest rates hit 0%, its wealth and income gaps are the largest since the 1930s, and political polarization is the most extreme since 1900.

This is a very special moment for China and the U.S., said Dalio, due to the development and rapid opening of Chinese capital markets, the relative attractiveness of yuan-denominated assets, and global investors’ underweighted involvement in them previously. By contrast, the fundamentals of the U.S. and the dollar are becoming more challenging, making China a relatively competitive place to move capital.

These changes will broadly benefit both Chinese and foreign investors, Dalio said, as Chinese investors will also learn more amid the opening-up. “I look forward to what is to come and to continue to be a participant in this remarkable journey,” he said.

This article was first published in Caixin Global.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.