The West's Restrictions on Chinese Access to Microchips

In a thought-provoking interview, hedge fund billionaire Ray Dalio draws a striking parallel between the West's current efforts to prevent China from obtaining microchips and the policies implemented by the United States towards Japan in the 1940s. These policies towards Japan, notably the restrictions on oil exports, are widely considered to have contributed to the escalation of the Second World War.

Dalio, the founder of Bridgewater, a multi-billion dollar investment fund established in 1975, expressed his views during a discussion on the Money Maze podcast. He believes that the limitations imposed on China's importation of crucial high-tech machines for semiconductor production have already begun to impact companies such as Nvidia and ASML Holding.

Drawing upon historical events, Dalio highlights the connection between the actions taken against Japan in the past and the current efforts to contain China's growth. He suggests that Western powers, led by the United States, perceive China as a rising threat to the existing world order. In his perspective, the restrictions on China's access to semiconductor technology serve as a microcosm of a larger battle for global hegemony. Dalio asserts, "The winner of a technology war is going to be the winner of this global world order war."

Moreover, Dalio argues that both China and the United States are preparing for an eventual conflict. He points to internal struggles within China, such as the removal of defense minister Li Shangfu in October and foreign minister Qin Gang in July, which he believes mirror the internal political conflicts occurring in the United States.

This astute analysis by Dalio prompts valuable reflection on the potential consequences of imposing restrictions on China's access to vital technology. It serves as a reminder that actions with far-reaching implications can significantly shape the course of global affairs.

The Risk of Internal Conflict in Times of War

Renowned investor Ray Dalio suggests that internal political struggles in both the United States and China are indications of preparations for the outbreak of war. He explains that during times of war, there is a strong need for unity, often leading to a dictatorial-like environment. Even in the United States during World War II, being anti-war was not tolerated.

However, Dalio acknowledges that both countries currently fear war due to the extensive interdependence of their economies. He highlights that cutting ties between the two nations would have significant consequences, considering that China accounts for 22% of American manufactured goods imports.

Dalio reflects on his first trip to China in 1984 when Chairman Deng Xiaoping introduced sweeping economic reforms that shifted the country away from Maoism towards a more capitalist approach. Deng's philosophy was summed up by the phrase: "It doesn't matter if it's a white cat or a black cat, just as long as it catches mice."

Over the years, Dalio has developed connections with influential figures in China, including former Vice President Wang Qishan. Despite this, he has been careful to commend China's capable leadership when discussing his views on the country. Nevertheless, it is worth noting that Dalio's company, Bridgewater, utilizes offshore financial instruments to bet against Chinese assets in a manner that evades the Chinese government's detection.

In conclusion, Dalio's insights shed light on the internal struggles within the United States and China and their relationship in times of potential conflict.