Today, as promised last week, Ray Dalio shared his candid thoughts about what is going on with the US-China relationship, their relationship with other countries, and what is going on in China. This is the sequel to last week’s post. Below are my thoughts/impressions after reading his post.
1. Ray Really means it when he says he will speak frankly
This is probably the first time that I have seen Ray’s writing to be this direct regarding the US-China relationship and global geopolitics. This is how he explains his intention “The purpose of this memo is to describe as accurately as I can what I believe to be true without any biased assessments of who is doing what right or wrong. My goal is simply to increase understanding to help minimize miscalculations. I will speak frankly, probably too frankly for some, because I believe in the power of collectively trying to objectively look at what’s true and explore what to do about it. At the same time please understand that while I believe the following to be true, I’m not certain of anything.”
It is probably impossible to be an objective observer without any biases. And I don’t expect Ray to be. Also, there is a decent possibility that, given Ray’s previous writing/sharing and approach, senior stakeholders across countries (the US, China, and other countries) will engage with Ray to have him reshare their messages at some point in the future. Conversely, Ray was not a freshman who eagerly believed everything someone else told him. So with these caveats and context, I will share some of his assessments that startle me below.
2. The United States and China are on the brink of war and are beyond the ability to talk
“What I mean when I say that the US and China are on the brink of war is that it appears that they are close to having a sanctions war and/or military war that neither side wants but many believe will probably happen because a) each side is very close to the other’s red lines, b) each side is using brinksmanship to push the other at the risk of crossing each other’s red lines, and c) politics will probably cause more aggressive brinksmanship over the next 18 months.” Ray wrote.
“As for the two sides not being able to talk with each other, what I mean is that discussions about big, important things have become exchanges of accusations that worsen relations rather than help them, so it is worse to have the discussions than to avoid them.”
Ray’s assessment here seems to align with what Kevin Rudd and Singapore Prime Minister Lee have been saying. You can watch Prime Minister Lee’s latest sharing below.
With Kevin being in Washington as AU ambassador to the US, I hope that he can have some impact in making the US-China relationship a managed strategic competition vs. a hot war. (You can read more about his book “The avoidable war” here.)
3. Chinese and American Relations with Other Countries
For this part, I somewhat disagree with what Ray is sharing. While the narrative “the West is declining and the East is rising” has been a popular narrative, and there are data points to support that, the fact is that the US is still the number 1 empire with strong absolute power. The way China handled the zero covid policy over the past few years gave many people doubt about its future trajectory.
I am no geopolitics expert, but from what I have been reading, most countries don’t want to choose between the US or China. How they choose if a military conflict was to happen is far from certain.
4. The Chinese Internal Environment
“Governance is now: a) more dictatorial-autocratic (in their words, “legalist”), run by Xi with a tight and loyal team of capable followers whose backgrounds are more often coming from running provinces than working at the center of things in Beijing, b) with Marxist influences (in favor of redistributions of wealth and opportunities), and c) with tolerable amounts of capitalism sprinkled in (i.e., enough to promote entrepreneurial inventiveness and business efficiencies).” Ray wrote
These are strong and direct words. They are not easy to hear, to say the least.
Again this is where I connect what Ray wrote here with what Kevin shared and they are consistent with each other. (More about “China’s Competing Ideological and Economic Policy Objectives in 2023” here)
Do these direct messages from Ray Dalio a cause for concern? Well, yes. If you have been following Ray Dalio’s work over the years, you will find he hasn’t used this type of direct language before. Coupling this with what Kevin Rudd and Prime Minister Lee from Singapore are saying, it does make one pause and think deeply about what is in store for us in the next 18 – 24 months. How should you prepare as an individual, as a family? How do you protect what you have against these odds? Remember, though, nothing is inevitable.
These are the questions that I will need to think more about. Each person’s situation is unique, but I encourage you to think through them too.