Billionaire Ray Dalio: Stop thinking the US and China will go into nuclear war

“The possibility of war is leading Chinese leaders to prioritize self-sufficiency over cost-efficiency, as is happening in the United States, which is not good for real growth,” the Bridgewater Associates founder wrote in an article published Wednesday was published on LinkedIn, citing the two countries are already at “war” over trade, technology, geopolitical influence and the economy.

The comments come after US President Joe Biden met with his Chinese counterpart Xi Jinping on the sidelines of the G20 summit in Bali on Monday. The US said the two sides would resume cooperation on issues such as climate change and food security, though disagreements remain on many issues, including Taiwan’s fate.

Dalio said he had heard there was “some possibility” that a new Republican-controlled House of Representatives would pass legislation supporting Taiwan independence, which would “very likely” lead to some sort of military conflict with China.

“The fact that this is a possibility, whether it occurs or not, leads to harmful consequences,” he wrote. “The 2024 elections in the United States and Taiwan, Japanese rearmament and the likelihood of worsening global economic conditions around this time make 2024-25 a particularly risky time.”

China-US tensions are among eight major challenges creating a “dangerous storm” for China’s new leaders, Dalio wrote. The leadership team under Xi is likely to have more unified views, show more power and support a state-controlled economy rather than free markets, the article said.

In another major challenge, China’s real estate and debt problems have seeped through the financial system and “into the bones of the economy,” Dalio said, adding that if handled well, they will take two to three years to get fixed.

Covid-19 is also not an easy problem to solve given China’s under-vaccinated elderly and insufficient medical resources, while the government’s pursuit of shared prosperity has direct and indirect adverse effects on markets, Dalio added.