World's Largest Hedge Fund Manager Sees Dollar Losing Reserve Currency Status

With the end of 2018 marking the 40th anniversary of China opening up and reforming (and with an increasingly loud group of market participants questioning the foundations of China’s economic miracle - and more importantly, it's future), Bridgewater founder Ray Dalio believes now is a good time to reflect on China’s last 40 years.

"Since I have been fortunate to have experienced 34 years of this 40 years in an up close and intimate way, and since I study what makes countries succeed and fail, I have some experiences and thoughts to share..."

The table below shows just a few representative statistics.

These results speak for themselves, but Dalio adds:

"To have such rates of improvements in so many areas and for so many people has made it the greatest economic miracle ever."

And from what Dalio has seen, he believes that the very impressive results that the Chinese leadership and the Chinese people produced came about primarily because of the powerful combination of:

a) China’s opening up and reforming following an extended period of isolation that led to a fast catching up (especially in the coastal regions of China) with the advanced developed world, and

b) the power of the Chinese culture and it’ related ways of operating.

Crucially, the billionaire hedge fund manager points out that, if you haven’t spent time in China, you need to get any stereotypes you might have out of your mind because it’s not how it was. This is not your father’s communism. It is “socialism with Chinese characteristics” that has been significantly and very effectively reformed, which has made it much more vital, creative, and economically free.

Dalio's 'romantic' view of a paternal China is definitely not the mainstream narrative:

"From my experiences and from what I am told by Chinese who should know, I believe Chinese leadership seeks to run the country the way they believe a good family should be run, from the top down, maintaining high standards of behavior, putting the collective interest ahead of any individual interest, with each member knowing their place and having filial respect for those in the hierarchy so the system works in an orderly way. One of China’s leaders who explained this concept to me told that the word “country” consists of two characters, state and family, which influences how they view their role in looking after their state/family.

One might say that the Chinese government is paternal. For example, it regulates what types of video games are watched by children and how many hours a day they play them. As a broad generalization, when the interest of the country (like the family) is at odds with the interest of the individual, the interest of the country (like the interest of the family) should be favored over the interest of the individual. Individuals are parts of a greater machine. As a result of this perspective, the system seeks to develop, promote and reward good character and good citizenship. For example it gives people a social credit score that rates the quality of their citizenship. And each person is expected to view themselves as parts of the greater whole.

 This management from the top down includes visualizing what China 5, 10 and 20 years in the future should be like and then making and managing detailed multiyear plans to build out that vision, with the goal being to make China as great as it can be. China is run more like a giant company with many subsidiaries, some within the government’s direct control and some within its indirect control. "

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