Country Garden suspends trading! Bridgewater founder warns: China will face a "century storm"

China's largest property developer, Country Garden, will be suspended from trading starting next week due to its inability to disclose its 2023 performance 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 "hundred-year storm."

Country Garden Unable to Release Annual Report on Time, Trading to be Halted in April

According to a report by Hong Kong Economic Times, Country Garden (02007), once seen as a leading private property developer, announced the need to postpone the publication of its 2023 annual performance, indicating that Country Garden will not comply with the "Listing Rules" and will be suspended from trading on April 2. Country Garden's stock price closed at 0.485 yuan on Friday, with a market value of 13.6 billion yuan, and its stock price has plummeted by 95% over the past three years.

Country Garden attributed the delay to industry fluctuations, debt restructuring causing difficulties in accounting estimates and judgments. Three independent non-executive directors who joined Country Garden's board before its listing have resigned two weeks ago.

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Ray Dalio Warns: China to Face "Century-Long Storm"

Ray Dalio, founder of Bridgewater Associates, which has always maintained a good relationship with China, issued a rare warning, agreeing with Chinese President Xi Jinping's political slogan of "a century-long great change," believing that China should reduce debt and relax monetary policies, or else it will face a "century-long storm."

Ray Dalio outlined the five major conditions in China:

Enormous debt and economic problems are hindering economic activity, prices, and psychology

China's economy is in a very difficult period, as many people are suffering from declining real estate, stock, and other asset prices, as well as negative wealth effects from employment issues and declining employee compensation. 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 corrective measures are not taken promptly, China will face a "century-long 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 exacerbates conflicts in wealth and values

Internal wealth disparity has led the government to promote common prosperity and seemingly arbitrary government-led actions, moving China towards a more legalistic, authoritarian, and communist direction. This is also evident in China's new Premier Li Keqiang's decision to cancel the press conference for the first time in 30 years, choosing to reduce transparency at this riskier moment rather than increase it.

Negative impact of China-US conflict outweighs other factors

The China-US conflict has led to foreign and domestic investors and companies diversifying or leaving China, and concerns about global discrimination due to being friendly towards China.

Climate-related issues will make China pay a price

Issues such as droughts, floods, epidemics, and insufficient clean water could impose a significant cost on China and cause great harm.

Technology war has yet to reveal its true nature

Both China and the US have invested heavily in many technologies through different approaches, one being top-down and government-led, the other bottom-up and initiated by enterprises/capitalists. In areas such as chips, artificial intelligence, quantum computing, outer space, batteries, clean energy, electric vehicles, and robots, some fields are led by China, while others are led by the US. Whoever wins the technology war will win the economic, geopolitical, and military wars. However, we cannot accurately predict future developments at present.

Dalio Still Finds Chinese Asset Prices Attractive

Based on these reasons, Dalio finds President Xi Jinping's political slogan of "a century-long great change" understandable. However, when asked about his views on investing in China, Dalio stated:

The prices of high-quality assets in China are very attractive, and my investments there have done very well. I 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 strive to enhance mutual understanding through my thorough honesty.

Bridgewater Associates, a global hedge fund, is one of the world's largest, founded by Ray Dalio in 1975. Its wholly-owned subsidiary Bridgewater China was established in 2016, with assets under management reaching 40 billion RMB by the end of 2023.