The Senate on Wednesday overwhelmingly passed a $768 billion defense policy bill directing the president to develop a “grand strategy” to counter the global economic and military threats posed by China.
The vote came as news emerged that US military leaders had devised a software tool designed to predict how China would react to US activities in the region, such as US officials’ visits to Taiwan.
In a new taped interview on Monday, billionaire hedge fund giant Ray Dalio said a military confrontation between the United States and China is currently unlikely. However, he added, if a war broke out between the United States and China, it would likely be over Taiwan, a disputed entity located roughly 100 miles off the coast of southeast China.
“Well, I think if there’s a military war issue, it’s probably around Taiwan,” Dalio told Yahoo Finance’s editor-in-chief Andy Serwer. Later, Dalio added, “Watch closely what’s happening with Taiwan, and you’ll see straw in the wind.”
While Taiwan has a democratically elected government and a “strong informal relationship with the United States,” the United Nations does not recognize it as an independent country. As Serwer noted in a column for Yahoo Finance last month, Taiwan has been in political limbo since the Chinese Civil War nearly three-quarters of a century ago. But recently, tensions between the United States and China over Taiwan have flared.
Communist China, for its part, insists that Taiwan is a province of the mainland. The country repeatedly entered Taiwan’s air defense zone last year, and in October China condemned the United States and Canada for trying to “foment unrest” by sending warships through the Taiwan Strait.
Speaking to Yahoo Finance, Dalio described Taiwan’s status and the potential for it to incite military action between the United States and China this way: “It’s an important issue to go into. I think you’re watching it.”
This isn’t the first time Dalio has commented on Chinese tensions. He has faced backlash over the fact that his hedge fund, Bridgewater Associates, has investments in China – particularly after an interview with CNBC last month where it appears to be almost Autocratic state government to ‘strict fatherIn a LinkedIn post on December 5 clarifying the statement, he said that this view was not his own, but rather was explaining what a Chinese leader had told him about the country’s approach to governance.
Dalio went on to note that Bridgewater invests in about 40 countries, including China, and that it relies on guidance from regulators in those countries and in the United States, however, he added, “Having said all this, what I think and what Bridgewater is doing is relevant. Little importance compared to the rapidly increasing risks of a US war with China due to misunderstanding and a tendency to fight…”
However, the war is not Dalio’s only concern about China. In his new book, “Principles for Dealing with a Changing World Order,” the hedge fund manager is confident that China will become a greater global power than the United States, as noted by The Wall Street Journal. He reiterated this prediction to Yahoo Finance.
“China’s population is four times that of the United States,” Dalio noted. So if her average income was half the United States, it would be twice the United States.
While China may one day become a larger global power than the United States, its economy has struggled amid the pandemic, the country’s regulatory crackdown on Chinese companies, and a prolonged real estate downturn caused in part by the downfall of mega developer Evergrande.
For his part, Dalio stressed that the United States must shift its focus toward itself. “If we do the right things, to be strong, to be stronger than any opposition in the world, we will have no problem,” he said.
Erin Fox is deputy managing editor at Yahoo Finance.
Read the latest financial and business news from Yahoo Finance
Follow Yahoo Finance on TwitterAnd InstagramAnd YoutubeAnd Facebook social networking siteAnd Flipboard, And LinkedIn