Country Garden Suspends Trading! Bridgewater Founder Warns: China to Face “Century Storm”
China’s largest real estate developer, Country Garden, will halt trading next week as it is unable to publish its 2023 performance by the end of March. Meanwhile, Ray Dalio, founder of Bridgewater Associates, which has always had a positive outlook on the Chinese market, has warned that China should reduce its debt and relax its monetary policy, or it will face a “century-long storm.”
Contents:
– Country Garden unable to release annual report, to halt trading in April
– Ray Dalio warns: China will face a “century-long storm”
– Massive debt and economic problems are suppressing economic activity, prices, and sentiment
– Intensification of internal wealth disparity and the resulting conflicts in wealth and values
– Negative impact of the China-US conflict is significant
– China will pay the price for climate-related issues
– Technological war has yet to reveal its true nature
– Dalio still believes Chinese asset prices are attractive
According to a report by the Hong Kong Economic Journal, Country Garden, which was once seen as a leading private enterprise in the real estate industry, announced that it needs to delay the publication of its 2023 annual performance, which means it will not comply with the Listing Rules and will be suspended from trading on April 2. Country Garden’s stock price closed at HKD 0.485 on Friday, with a market value of HKD 13.6 billion. Its stock price has fallen by 95% over the past three years.
Country Garden attributes its inability to publish the annual report on industry volatility and difficulties in accounting estimates and judgments. Three independent non-executive directors who joined Country Garden’s board before its listing resigned two weeks ago.
Ray Dalio, founder of Bridgewater Associates, which has always maintained a good relationship with China, has issued a rare warning. He agrees with Chinese President Xi Jinping’s political slogan of the “century-long great transformation” and believes that China should reduce its debt and relax its monetary policy, or it will face a “century-long storm.”
Dalio has identified the following five conditions in China:
1. China’s economy is going through a very difficult period because many people are experiencing negative wealth effects from falling real estate, stock, and other asset prices, as well as employment problems and declining employee compensation. Additionally, many companies and local governments are facing debt and financial problems, which, if not handled well, will have adverse consequences for a long time.
2. Dalio believes that China should have implemented “beautiful deleveraging” two years ago, and if it doesn’t act quickly to remedy the situation, 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.
3. Internal wealth disparity has led to government initiatives for shared prosperity and seemingly authoritarian actions, pushing China towards a more legalistic, authoritarian, and communist direction. This is also evident in Chinese Premier Li Keqiang’s decision to stop holding press conferences for the first time in 30 years, choosing to reduce transparency at a time of greater risk rather than increase it.
4. The China-US conflict has led to foreign investors and companies, as well as domestic investors and companies, diversifying or leaving China and fearing global discrimination due to their friendly stance towards China.
5. Issues such as droughts, floods, epidemics, and insufficient clean water could impose a significant cost on China and cause great harm.
Both China and the United States have invested a significant amount of talent and resources in many technologies, with China adopting a top-down, government-led approach and the US taking a bottom-up, business/capitalist-led approach. In areas such as chips, artificial intelligence, quantum computing, outer space, batteries, clean energy, electric vehicles, and robotics, China leads in some areas while the US leads in others. The winner of the technological war will also win the economic, geopolitical, and military wars. However, we currently cannot accurately predict future developments.
Based on these reasons, Dalio believes that President Xi Jinping’s political slogan of the “century-long great transformation” is understandable. But when asked about his views on investing in China, Dalio said:
“The prices of high-quality Chinese assets are very attractive, and I have done very well with my investments there. I also have great affection and respect for the Chinese people and culture. For these reasons, I remain committed to meaningful work, meaningful relationships, and investments, and I strive to enhance mutual understanding through my radical honesty.”
Bridgewater Associates is one of the world’s largest hedge funds, founded by Ray Dalio in 1975. Its wholly-owned subsidiary, Bridgewater China, was established in 2016 and had assets under management of RMB 40 billion by the end of 2023.
Ray Dalio
China
Bridgewater Associates
Country Garden
