China’s largest property developer, Country Garden Holdings, will suspend trading next week as it is unable to release its 2023 financial results by the end of March. Meanwhile, Ray Dalio, the founder of Bridgewater Associates, who has always been optimistic about the Chinese market, has warned that China should reduce its debt and relax its monetary policy, or else it will face a “century storm”.
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Country Garden unable to publish annual report as scheduled, to be suspended in April
Ray Dalio warns: China will face a “century storm”
Huge debt and economic problems are suppressing economic activity, prices, and sentiment
Internal wealth disparity and the resulting conflict in wealth and values are intensifying
Negative impact of the China-US conflict is greater
China will pay a price for climate-related issues
The technology war has yet to reveal its true nature
Dalio still sees attractive asset prices in China
According to a report from the Hong Kong Economic Journal, Country Garden, once regarded as the leading private property company, announced that it needs to delay the release of its 2023 annual results, which means it will not comply with the Listing Rules and will be suspended on April 2. Country Garden’s stock price closed at HKD 0.485 on Friday, with a market value of HKD 13.6 billion. Its stock price has fallen by 95% over the past three years.
Country Garden attributed the delay to industry volatility and difficulties in accounting estimates and judgments. Three independent non-executive directors who joined the board of Country Garden before its listing resigned two weeks ago.
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The worst year since 2015! Will China’s stock market be abandoned for ten consecutive weeks? Will Country Garden postpone its release?
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Ray Dalio, the founder of Bridgewater Associates, who has always maintained a good relationship with China, has also issued a rare warning. He expressed agreement with Chinese President Xi Jinping’s political slogan of the “great changes of the century” and believes that China should reduce its debt and relax its monetary policy, or else it will face a “century storm”.
Ray Dalio has identified five major conditions in China:
China’s economy is going through a very difficult period, as many people are suffering from falling real estate, stock, and other asset prices, as well as negative wealth effects from job and wage declines. Additionally, many companies and local governments have debt and financial problems, which, if not handled well, will have adverse consequences for a long time.
Dalio believes that China should have implemented a “beautiful deleveraging” two years ago. If it does not remedy the situation quickly, China will face a “century storm”. However, Dalio also acknowledges that this will be difficult and politically risky, as it will lead to significant changes in wealth levels.
Internal wealth disparity has led to the government pushing for common prosperity and taking seemingly arbitrary actions. China is moving towards a more legalistic, authoritarian, and communist direction. This is also reflected in Chinese Premier Li Keqiang’s decision to stop holding press conferences for the first time in 30 years, choosing to reduce transparency at a time of greater risk rather than increase it.
The China-US conflict has led foreign investors and companies, as well as domestic investors and companies, to diversify or leave China and fear global discrimination due to their friendliness towards China.
Droughts, floods, epidemics, and insufficient clean water resources could cause China to pay a great price and suffer immense damage.
China and the United States have invested a lot of talent and resources in many technologies, using different approaches: top-down, government-led, and bottom-up, initiated by companies/capitalists. In areas such as chips, artificial intelligence, quantum computing, outer space, batteries, clean energy, electric vehicles, and robots, China is leading in some fields, while the United States is leading in others. The winner of the technology war will also win the economic, geopolitical, and military war. However, at present, we cannot accurately predict future developments.
Based on these reasons, Dalio believes that President Xi Jinping’s political slogan of the “great changes of the century” is understandable. But when asked about his views on investing in China, Dalio said:
The prices of high-quality assets in China are very attractive, and my investments there have been very successful. I also have great affection and respect for the Chinese people and culture. For these reasons, I am still committed to meaningful work, meaningful relationships, and investments, and I strive to enhance mutual understanding through my thorough honesty.
Bridgewater Associates is one of the world’s largest hedge funds, founded by Ray Dalio in 1975. Its wholly-owned subsidiary, Bridgewater China, was established in 2016 and has managed assets of 40 billion RMB by the end of 2023.
Ray Dalio
China
Bridgewater Associates
Country Garden
Further reading:
Ray Dalio of Bridgewater: Bitcoin is unrelated to anything, and the pursuit should not be stablecoins
Ray Dalio of Bridgewater steps down, no longer sees cash as trash, recounting the history of changing views on Bitcoin.