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- Ray Dalio Turns Against China: Risk of War Increases as Concern Over Chinese Economy Grows
Ray Dalio Turns Against China: Risk of War Increases as Concern Over Chinese Economy Grows
Explore the latest development as prominent investor Ray Dalio takes a stand against China, leading to a rise in concerns over potential war risk and the stability of the Chinese economy. Stay informed with expert political and economic analysis on China's evolving landscape.
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Video Transcript
Welcome to another episode of China Update,
by providing you with the most up-to-date political,
economic and geostrategic analysis
on the world's number two economy.
My name is Tony, let's jump in.
Happy Friday, everybody.
I hope you've had a productive week
and I wish you all a restful weekend ahead.
And for those who celebrate it,
best wishes on this good Friday and Easter weekend.
Let's begin with two quick economic updates.
This week Chinese financial media
out there, Tsai Sen reports that several of China's
small and mid-sized banks have cut interest rates on five year time deposits to protect
their profit margins as expectations grow for a continued decline in lending rates.
There are already signs, lenders are feeling pinched. The average net interest margin of
all Chinese commercial banks fell to a record low of 1.69% last year, below the warning
level of 1.8% that a government-backed industry group has defined as responsible profitability.
quote,
The regulators are in tough position.
While lower lending rates benefit borrowers, lower deposit rates reduce disposable household
income, and squeezing bank margins increases the eventual cost of recapitalizing an increasingly
undercapitalized banking system."
End quote
Meanwhile on Thursday US-based research firm China Beigebook published its new business
survey, arguing that China's economy is ending the first quarter on a quote, strong,
The economy clearly improved in March. Things are better. Thanks to better industrial activity and stronger retail spending."
China-Bage books said it surveyed 1,436 businesses between 1 March and 23rd, split roughly between state-owned and non-state-owned firms.
The report observed, quote,
"'Our March data show the economy poised for a strong end to Q1. Revenue growth accelerated
atop last month, while pricing gains boosted margins." The report added, quote,
"'Market observers have largely missed the substantial policy easing with track over the past year,
and now some vendors may be hitting the brakes."
quote, unquote, hiring recorded its longest stretch of improvement since late 2020."
Retail spending increased in all subsectors except for luxury goods.
In real estate, the residential sector still showed a decline in sales but commercial
sales and construction improved significantly.
After years of poor economic stories, these are positive signs for policy makers.
We note however that these are from no bases and Beijing still faces significant structural
crises in housing, local fiscal conditions and demographics to name a few. Indeed, as
we will see later in today's video, Ray Dalio, formerly a China bull, has become much more
pessimistic about China's economic outlook.
Next up, yesterday Thursday, the president of the Philippines said that his government
would take action against what he called dangerous attacks by the Chinese coast guard. We've
been following these tensions closely in recent months. The letters flare up occurred
last week when China used water in canon to disrupt another Philippine resplendent mission
to the Sikantama shawl, the soldiers posted to guard a warship intentionally grounded
on a reef 25 years ago. President Markos comments are the latest sign of the escalating dispute
between China and the Philippines, a US ally, in the contested waters that have seen
collisions and a war of words. The resource rich South China Sea, one of the world's most
