Ray Dalio book reveals China feared ‘worst-case scenario’ before trade war
Prominent hedge fund manager’s upcoming book about the rise and fall of empires touches on China’s ties with the United States, which have deteriorated to their worst point in decades.
When China’s top trade negotiator, Vice-Premier Liu He, walked into the Oval Office to meet US President Donald Trump in May 2018, he was not concerned so much with the outlook of trade negotiations as he was with the potential for escalating disputes between the world’s two largest economies.
That bit of prognostication was one detail from American billionaire hedge fund manager Ray Dalio’s upcoming book, The Changing World Order, about the rise and fall of past empires. In it, he dedicates a chapter to China’s history and currency, and another to the Sino-US relationship.
Dalio described Liu as “a skilled, wise, humble and likeable man”, and said the two became friends over the years. After his meeting with Trump, Liu spoke with Dalio and expressed deep concerns over the possibility of a worsening relationship between the two superpowers.
“He explained that, going into his meeting with Trump, he was concerned about how it would go, not because of the trade negotiations, which he was confident didn’t have any issues that couldn’t be worked out, but because he was concerned about the worst-case scenario where tit-for-tat escalations could get out of control and lead to more serious consequences,” Dalio wrote.
Liu’s thinking, as revealed by Dalio, partly reflects the fear among top Chinese leadership in the early days of the high-level trade negotiations. And that fear has become a reality now that the relationship between the two countries has deteriorated to the worst point in decades.
After agreeing to a phase one trade dealin January, the United States and China have squared off in multiple sectors beyond trade – from revocations of journalists’ visas to closures of consulates.
In his new book, Dalio was trying to make a point based on his research into China’s history – that Chinese people often see things in longer terms and tend to be “thoughtful and strategic”, whereas Americans are more “impulsive and tactical”, and that Chinese leaders are more philosophical than their American counterparts.
“While most Americans focus on particular events, especially those that are now happening, most Chinese, especially their leaders, see evolutions over time and put what is happening in the context of them. While Americans fight for what they want in the present, most Chinese strategise how to get what they want in the future,” he wrote.
Dalio said Liu once told him a personal story of his father, a former Communist Party official who took his own life during the Cultural Revolution in 1967. The anecdote helped serve to illustrate Liu’s aversion to war.
“We exchanged views on long-term cycles in history and his belief in the concept of a community with a shared future for humankind,” Dalio wrote. “He talked about reading the Tao Te Ching [a Chinese classic text] by Lao Tzu and Critique of Pure Reason by Immanuel Kant, and how he realised that he should do his best, and then the outcomes would take their course.
“From there, he gained his calmness. I told him that I shared that perspective. I told him about the Serenity Prayer and suggested meditation to him as a way of helping to obtain that perspective.”