My long-term position on China is widely recognized among my investors. I appreciate a partner sharing another interesting article by Ray Dalio, which could be of interest to some investors regardless of their views on China. There is a price for everything. Chinese assets ticked all the right boxes at the current levels.
Here is a section:
History shows that in all countries through all times during these very difficult 100-year-storm-like periods, leaders go to much more autocratic policies because the alternative becomes great internal conflict and disorder, and typically there are forced changes of leadership that those in power fight against. This is especially true in the Chinese culture.
Losing the “mandate of heaven” is something everyone is aware of. A Chinese scholar told me that 38% of China’s emperors died of unnatural causes while in power. There are many dynasties that went through such big storm periods and different philosophies that emperors used to guide them.
“Legalism” is the belief that people are motivated by self-interest, especially during difficult times, so they must be required to strictly follow the emperor and his rules, especially big storm periods. The legalist approach with Marxist/Maoist characteristics appears to be the approach Xi has chosen.
To be clear, I don’t think that what it is exactly is clear to either non-policy makers or policy makers. They appear to be figuring out the “dialectic.” For example, I know that entrepreneurship and open markets remain much more open than my characterization of a legalist approach with Marxist/Maoist characteristics would seem to imply.
While people can debate the merits of Xi and the Chinese government creating a fearful and strict-control environment to get people to behave the way the government wants them to behave, just as people can debate the merits of the American government’s more democratic and disorderly approach, it is more important to see what’s happening as objectively as possible than to be quick to pass judgments on it.