Foreign investment has been lured into China by a combination of its recovery from the pandemic — which means its economy will have grown about 1.9 per cent last year, according to the IMF, even as developed peers suffered their biggest recessions in generations — and moves to include its stocks and bonds in several influential financial indices.
Tens of billions of dollars worth of inflows from international investors helped lift the CSI 300 mainland stock index by 27 per cent in local currency terms during 2020. Chinese government bonds, meanwhile, still offer yields far greater than developed countries' debt.
Many analysts and money managers expect international investors to continue ratcheting up their allocations to China in the coming years. "I have been immersed in China since 1984 and bullish on China for a long time . . . and all the time I got scepticism — up until now," Dalio said.
Investing in China clearly brings challenges and political risks, highlighted by the suspension of Ant Group's planned flotation last year, when Beijing put on ice what was set to be the world's biggest IPO.
"Nothing's perfect, but you've got to diversify," Dalio said. "The capital markets are not only growing, they're good investments, and the world is underinvested there."
Dalio predicts China could in time account for a "very meaningful" part of Bridgewater's business, which has about $150bn in assets under management. The onshore, renminbi-denominated version of its All Weather China Fund has about $300m under management, and returned 24.6 per cent last year.
All Weather is a range of "risk parity" funds, a passive strategy designed to generate steady returns by investing in a variety of markets, weighted according to their volatility.
The China offshore version has about $4bn in assets and returned 11.9 per cent in 2020, while the flagship Pure Alpha fund — a more traditional "macro" hedge fund that seeks to profit from economic trends — lost 7.6 per cent, according to people familiar with the matter.
Dalio expects to introduce something more similar to Bridgewater's Pure Alpha Fund in China in the coming years. "As we learn more, develop our expertise and build our edges, we will build that out more completely," he said.
© Financial Times