Ray Dalio on investing in China amid expertise and schooling crackdowns

The robot Xiao Cong moderates, speaks and plays with students in class at a school in the Chinese province of Zhejiang.

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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 that those who think this way will “keep missing out” on what is happening in the Asian country.

He said he was referring to Western observers who have no direct contact with politics and “do not follow in detail” the patterns of change “in the government.”

“They interpret movements like these two recent ones as the leaders of the Communist Party showing their true anti-capitalist traits, even though the trend over the past 40 years has clearly been towards a market economy with capital markets where entrepreneurs and capitalists get rich. ” “Said Dalio.

“As a result, they have missed what is happening in China and are likely to continue to miss it,” added Dalio, founder of the world’s largest hedge fund, Bridgewater Associates.

… do not interpret this wobbling as a trend reversal and do not expect that this Chinese state capitalism is exactly like western capitalism.

Ray Dalio

Founder, Bridgewater Associates

Dalio urged investors to understand that in the rapidly evolving capital markets environment, Chinese regulators “find adequate regulation”.

“So when they change quickly and are not clear, it creates this type of confusion that can be misunderstood as anti-capitalist movements,” wrote Dalio.

“Expect such things to happen in the future and invest accordingly. But don’t interpret this wobble as a turnaround and don’t expect this Chinese state capitalism to be just like Western capitalism, ”he concluded.

Taking action against education as an attempt to reduce inequality

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

Restrictions placed on the sector include a ban on tutoring in core school projects for profit reasons, Reuters reported, citing a document distributed by the State Council of China.

“I think the fundamental reason for this crackdown actually lies in the tutoring and education business (which creates social inequality) and behind the decline in the birth rate,” Claudia Wang, partner in the education practice at Oliver Wyman, told CNBC’s “Squawk Box” Asia.”

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However, it remains to be seen whether the new rules will really hold parents back.

Wang pointed out that there is a segment of parents who are “self-sufficient” and who can easily afford to seek tutors despite the limitations.

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

On the flip side, however, parents who are “more relaxed” will be put off and “just give up,” added Wang.

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