Ray Dalio, the founder of the world’s largest hedge fund, Bridgewater Associates, thinks China could weaponize its U.S. Treasury holdings to gain an upper hand in the escalating trade war between the world’s two largest economies.
The hedge fund titan’s views are in contrast with many other observers, according to CNBC.
China was the largest holder of U.S. Treasury securities worth $1.11 trillion until June when it was surpassed by Japan, data from the U.S. Treasury Department showed.
An escalating trade war between the U.S. and China has been cited by analysts and investors as the biggest threat to the global economy and financial markets. The exchange of tariffs between Washington and Beijing has already stoked recession fears.
Dalio said he “wouldn’t rule out” the possibility of China weaponizing its ownership of U.S. Treasury securities.
“We have a debtor-creditor relationship, not just a trade relationship. And (that) can be a dangerous thing,” he told CNBC’s Managing Asia.
“What we worry about — and I think it’s a reality — is that in this new world of adversely affecting each other economically and hurting each other’s businesses, each tries to think: ‘Now, how can I do the other the maximum harm?’ And the Chinese are clever at doing that.”
Dalio has remained bullish on investing in China, even as the trade war simmers towards a boiling point, the Financial Times reported.