Mr. Dalio has many thoughts, these on his LinkedIn platform were brought to our attention by Alphaville's Claire Jones in today's Further Reading post:
July 30
Understanding China’s Recent Moves in Its Capital Markets
Recent Chinese policy moves related to 1) DiDi’s listing and controls on its data usage and 2) China’s education companies being converted into non-profits have created a lot of doubt about capitalism and capital markets in China, so I’d like to help clarify what’s going on there.
I understand that it’s confusing to people who are not close to what’s happening. Since I started going to China 36 years ago, I have found that most Western observers who do not have direct contact with policy makers’ and don’t follow in detail the patterns of the changes have tended to not believe that the Chinese Communist Party’s usage of capital markets to foster development is real. They interpret moves like these two recent ones as the Communist Party leaders showing their true anti-capitalist stripes even though the trend over the last 40 years has clearly been so strongly toward developing a market economy with capital markets, with entrepreneurs and capitalists becoming rich. As a result, they’ve missed out on what’s going on in China and probably will continue to miss out. In this case the policy makers signaled to DiDi that it might not be best to go ahead with the listing and they understandably want to deal with the data privacy issue. In the case of the educational tutoring companies they want to reduce the educational inequality and the financial burden on those who are desperate to have their children have these services but can’t afford them by making them broadly available. They believe that these things are better for the country even if the shareholders don’t like it.
I remember a number of such analogous misinterpretations. For example, I remember how the Chinese retail investor bubble bursting led to government stock buying and then the government trying to manipulate the market for a while. Also I remember the Chinese currency plunge in 2015-16 resulting from the PBoC widening the band and how that led to many investors pointing to these developments as evidence that policy makers were turning away from developing capital markets. Some skeptical investors looked at these moves as inappropriate anti-free market interventions even though these same moves happened many times in many capitalist markets and even though the fiscal and monetary policy interventions in the U.S. and other developed markets dwarf the Chinese government interventions in its markets. Through it all Chinese policy makers successfully managed the fallout and pursued their goals; i.e., the direction of their actions never changed. It has been in support of a fast and steady development of capital markets, entrepreneurship, and openness to investment to foreign investors. So I encourage you to look at the trends and not misunderstand and over-focus on the wiggles....
....MUCH MORE
Dalio has a style all his own: "I have found that most Western observers who do not have direct contact with policy makers’...."
1980 $ 531.41
2009 $6,309.15
