Bridgewater’s Ray Dalio: US-China Relations Are ‘Right on the Brink’

Relations between the U.S. and China are “on the brink of red lines,” as “irreconcilable issues” remain at the edge, said Bridgewater Associates founder Ray Dalio on Tuesday.

A number of tensions between the two economic superpowers have been bubbling to the surface, and Dalio says they appear to be “right on the brink.” Foremost among them is the U.S. stance on Taiwanese sovereignty.

“The breaking point is if the United States said, ‘We are in favor of the independence of Taiwan.’ That’s the equivalent of declaration of war,” Dalio told Bloomberg TV at the Greenwich Economic Forum. “And because of our political issues now, internally, you are going to be likely to push that — because of the fact that many in the Congress and so on would say, ‘We’ll defend Taiwan.’”

Taiwan, an island separated from the People’s Republic of China by the Taiwan Strait, has been independently governed since 1949. Beijing’s “One China” policy claims Taiwan as a unified part of China, while Taiwan recognizes itself as a sovereign nation. Taiwan has formal diplomatic relations with just 12 countries and the Holy See as of this year. 

The modern-day battleground between the U.S. and China, Dalio says, are semiconductors and other technologies. He likened the recent disputes over chips to the role of oil in the Second World War.

“The reason in World War II — war with Japan — you had the cutting off of the oil and then sanctioning them, taking their payments,” Dalio said. Today, there’s a “much similar situation. Chip’s like oil back then.”

In August, President Joe Biden signed an executive order restricting U.S. investment in China in “sensitive” areas that could pose national security risks, including advanced computing chips and artificial intelligence. A week earlier, China’s export restrictions on key minerals found in semiconductors went into effect.

Treasury Secretary Janet Yellen visited China in July, seeking to soothe rising economic tensions between the two countries. She was the first treasury secretary to visit the country in four years amid souring relations.

Despite the back-and-forth between the two countries, Dalio acknowledged that “neither country wants to go to war.”

“Everybody’s afraid of what that war would be like because it would be devastating economically and politically,” he said.

Dalio founded asset management firm Bridgewater Associates — the world's largest hedge fund — in 1975. He stepped down as chief executive in 2017 and stepped down as chairman at the end of 2021.