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this week we'll learn from Ray dalio and his philosophies on investing in China for those of you who don't know who Ray dalio is he is one of the world's most respected investors he runs Bridgewater the largest Private Hedge Fund in the world and he has a personal net worth of over 20 billion dollars he's an expert in achieving what he calls the Holy Grail this is a term that he coined himself but it means investing and building your portfolio in a way that provides the best wrist adjusted returns essentially an all-weather portfolio which guarantees moderate to high returns with relatively low or no risk his hedge funds own large stakes in various Chinese companies and ETFs the largest one being in Alibaba drawing on his vast experience and knowledge of China he sheds a positive light on China's capital markets and dismisses some of the recent fear in the markets as a misunderstanding or misinterpretation of a long-term Trend this is coming from someone whose first focus is to protect his downside or protect investors downside and is a proven expert in it so when you think about people's current views on China especially names like Alibaba and tencent nobody argues with the big growth potential and Tailwinds that are there they just associate too much risk with the names and with China so it's compelling to see someone of Ray dalio's stature saying the risk is misunderstood and that he's bullish on China so in this video Let's cover some of the highlights of his most recent article and discuss my thoughts on all of the points that he raised this article was called understanding China's recent moves and its capital markets he posted it on LinkedIn just after the collective list of Crackdown news and he references the DD listing Scandal and the education companies as the primary Catalyst for down in China's capital markets but his plan here is to help clarify what's going on so he starts with letting us know that he has been going to China for 36 years now so he's very familiar with the culture the Ambitions and the intentions of policy makers and he's actually been in close contact with China's policy makers quite frequently in the past we really need to understand that China is a state-run capitalist system so different to what we know in the west and it means that the state runs capitalism to serve the interest of their people and policy makers won't let the sensitivities of capital markets like we see in the U.S and Europe and billionaires stand in the way of doing what they believe to be best for their country for example you know it's okay if you have the riches to make lots of money for yourself or your investors but don't mistake those riches for having the power to determine exactly how things will go in the future that will be the job of policy makers and the government he goes on to say I have found most western observers who do not have direct contact with policy makers and don't follow the patterns of change do not believe that the Chinese Communist party's usage of capital markets to Foster or create economic development is real they interpret moves like these two recent ones as a Communist Party showing their true anti-capitalist Stripes even though the trend over the last 40 years has clearly been so strong towards developing a market economy with capital markets and entrepreneurs and capitalists becoming rich and as a result they've missed out on what's going on in China and probably will continue to miss out China still has a very long way to go before fulfilling its full potential but people like to believe that China only wants to destroy its companies if they succeed rather than actually looking at the long-term trends that they've laid out and in next to No Time China has risen the majority of its population Nation out of poverty and become the second largest global economic superpower a lot of which was due to its adoption of the state-run capitalist system and more importantly Capital markets which allow for major foreign investment Ray dalio isn't the only man of wisdom who shares this exact view Charlie Munger a true patriot of America 97 years of age one of the best investors and most intelligent individuals has similar things to say about China's progress and true capitalist intentions he says China's economic record among the big Nations is the best that ever existed in the history of the world and that's very interesting a lot of people assume that since England led the Industrial Revolution and then had free speech early that free speech is required to have a booming economy as prescribed by Adam Smith the author of The Wealth of Nations a capitalist Playbook but the Chinese have proved you don't need free speech to have a wonderful economy they just copied Adam Smith and left out the free speech and it worked fine for them as a matter of fact it's not clear to me that China would have done better if they'd copied every aspect of English civilization I think they would have come out worse entirely possible that our system is right for us and their system is right for them so not only Ray dalio Charlie Munger also Echoes the same sort of message about China's strategy but now back to the article Ray dalio importantly points out exactly why authorities decided to take such actions recently with Didi they told them it would be best not to go ahead with their listing prior to dealing with their data privacy issues and Didi obviously ignored that and then in the case of educational companies they wanted to reduce the severe educational inequality that exists in their country in China it's something that they're trying to deal with and they're trying to reduce the financial burden on those who are desperate to get education for their children but can't afford them and they'll be doing this now by making Education Services widely available and this is all important in context because it shows that actions were taken with a clear aim to protect people's best interest and improve their country over the long term it wasn't done as a power play or to punish their success He also mentioned some cases in the past in China that provided a similar short-term reaction in the markets and even scared people off for the good to the point where they missed the run-up in the economy over the past five to six years and that's nothing out of the ordinary we know markets overreact and have very short-term memories it's up to the investor to capitalize on that he says further in the article that some skeptical investors looked at these moves as inappropriate and as anti-free Market interventions even though these same moves happened or very similar moves have happened many times in many capitalist markets for example handing out large fines in the U.S and in Europe for some of the big tech companies and mainly he references the major fiscal and monetary policy interventions in the U.S and Europe very recently that dwarfs the actions in the Chinese policy makers in recent years a lot of what people say puts them off investing in China and reference all of these bad things the Chinese policy makers have done is happening right under their nose in the developed Western markets but even with all of that in mind he reminds us that there is risk to consider with investing in China this isn't a risk-free situation by any means an example he uses is the geopolitical environment changing and there are some increased geopolitical risks involved which you can see in the U.S and the government's decisions to change its policies for the Chinese companies listing in the U.S they're enforcing stricter rules around what they need to do to be listed on the U.S exchanges and then the threats to prohibit American Pension funds from investing in China however it would be in the U.S pension fund's best interest to keep the door open to China especially to the larger more established companies or ETFs with clean track record on the Bridgewater website it says Bridgewater has been visiting and studying the evolution of China's economy and financial markets for more than 30 years over that time Decades of reform in China have resulted in one of the greatest economic transformations of of our lifetimes looking forward China is poised to continue growing as a driver of global economic and financial activity and presents a rare opportunity for Global Investors to access a large liquid and highly diversifying Market he believes that the U.S China relationship will undoubtedly be the most important bilateral relationship impacting the world over the next decade he also admits that it's a little bit unfortunate that China's policy makers don't publicly communicate the reasoning behind their moves more clearly in summary if we look at the key takeaways here I'd say number one China's long-term growth Trends are still very much intact even in capital markets there is still a big opportunity there even with the largest companies number two a lot of the recent news out of China has been misinterpreted and it aims pretty much misunderstood by investors number three there are definitely risks that exist in China but they are not catastrophic and you need to assume such risk could and will happen so invest accordingly and then lastly I'd say number four that time has shown that periods of peak pessimism and uncertainty have in fact been the best times to invest given that you have a medium to long-term investment Horizon China is a good buying opportunity right now and Ray dalio and a lot of other people think so whether that be through a diversified ETF or choosing the right quality company to purchase stock in they are very much discounted relative to the rest of the markets on average and have better future growth prospects these videos take a very long time to research and make so please leave in the comment section and like this video thank you for watching this video and if you enjoyed this video please like comment and 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