Ray Dalio says China must combine stimulus with ‘beautiful deleveraging’ | Wilnesh News

Bridgewater Associates founder Ray Dalio said at a conference on Friday that China must engage in “beautiful deleveraging” in addition to recent stimulus measures to avoid a debt crisis

The billionaire investor defines “beautiful deleveraging” as a balanced deficit approach that uses debt restructuring as well as money printing and debt monetization.

Restructuring leads to deflation, while money creation leads to inflation; therefore, it is the best way to reduce the debt burden, he said.

“This is a really interesting question for China in terms of how to deal with its debt problem,” Dalio said in a speech at the Future China Global Forum in Singapore.

“They have the ability to do it and I believe they have the will to do it. (Recent) policies prove that,” he added.

Since late September, Beijing has announced several waves of stimulus and reform measures aimed at boosting the economy.

“I think the changes that are happening are huge changes, but you still need to do debt restructuring,” Dalio said.

In addition to Beijing’s latest stimulus measures, markets have been watching whether policymakers will launch a fiscal stimulus package, with some economists suggesting it could be as high as 10 trillion yuan ($1.4 trillion).

Dalio said that while it is easy to create money and credit and put it into the economy, this can exacerbate other problems.

“You need to do it right and that’s part of the restructuring. That becomes the challenging part of it. I think that’s going to be the test.”

However, Dalio also outlined other challenges, including the fact that much of China’s debt is at the local level and the country’s aging population.

The Bridgewater Associates founder recently warned that Beijing’s attitude toward capitalism has become less favorable in recent times.

On Friday, he said it remained to be seen whether China could maintain “the vitality of its private markets” and foster the entrepreneurship and creativity of individuals in its capital markets.

“Is it glorious to be rich in China?” remains a question.

This year Beijing severely cracked down on “Show off wealth” The government also has a history of controlling wealthy entrepreneurs.

“I think it’s unclear what the specific direction and plans are. I’m sure of this: there’s a lot of uncertainty. More clarity would be better,” he told the meeting.

However, he added that China’s ongoing discussions on tax reform and raising the retirement age are good policy signals.

Dalio said achieving “beautiful deleveraging,” as he laid out in a report, could allow China to boost productivity and avoid a debt crisis. social media posts earlier this month.

On the other hand, he believes that improperly handled debt restructuring may have contributed to Japan’s economic and psychological malaise in the 1990s, often referred to as the “lost decade.”