Ray Dalio on investing in China amid tech and education crackdown

Robot Xiao Cong greets, talks and plays with students in class at a school in Zhejiang Province of China.

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Billionaire investor Ray Dalio says China’s recent regulatory crackdown has been misinterpreted as “anti-capitalist” by some Western investors.

In a note on his LinkedIn account, Dalio said investors who think this way “will continue to miss” what is happening in the Asian country.

He explained that he was referring to Western observers who have no direct contact with policy makers and “do not follow in detail the patterns of change” by the government.

“They interpret movements like these recent two as the leaders of the Communist Party showing their true anti-capitalist stripes even though the trend over the past 40 years has clearly been so strongly towards the development of a market economy with capital markets, with entrepreneurs and capitalists getting rich, said Dalio.

“As a result, they’ve missed out on what’s going on in China and will likely continue to miss,” added Dalio, founder of the world’s largest hedge fund Bridgewater Associates.

… don’t confuse these fluctuations as changes in trends, and don’t expect this Chinese state capitalism to be exactly like Western capitalism.

Ray dalio

Founder, Bridgewater Associates

Dalio urged investors to understand that Chinese regulators “set the right regulations” in the rapidly developing capital market environment.

“So when they change quickly and are unclear, it causes this kind of confusion, which can be misinterpreted as anti-capitalist movements,” Dalio wrote.

“Suppose such things will happen in the future and invest accordingly. But don’t interpret these fluctuations as changes in trends, and don’t expect this Chinese state capitalism to be exactly like Western capitalism, ”he concluded.

The repression of education in an attempt to reduce inequalities

The crackdown on the education sector is actually an attempt to reduce inequalities in the country as costs rise in the huge tutoring and enrichment industry, some analysts have said.

Restrictions on the sector include China banning for-profit tutoring in basic school projects, Reuters reported, citing a document that was distributed by the Chinese State Council.

“I think the fundamental reason for this crackdown is actually due to the tutoring and education training sector (creating) social inequalities and the declining birth rate,” said Claudia Wang, partner of the education practice at Oliver Wyman, at CNBC “Squawk Box Asia.”

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It remains to be seen whether the new rules will really hold parents back.

Wang pointed out that a segment of parents who are “self-sufficient” and who can afford to pay, will seek guardians despite the restrictions.

“Some of them have very high expectations. No matter how governments regulate the market, they won’t give up, they will find private guardians for their children,” she added.

On the other hand, however, parents who are more “laid back” will be put off and “give up,” Wang added.

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