Ray Dalio: China’s Dominant "Tributary System" Re-emerges, AI Industry Set to Follow the Path of EV Development
- Key Takeaway: Ray Dalio points out that the decline of U.S. global credibility and the rise of China’s power are driving the formation of a new China-centric "tributary system." In AI, China treats the technology as a universal public tool, focusing on broad accessibility and application rather than short-term profitability, and is likely to replicate the success of its electric vehicle industry.
- Core Elements:
- Dalio argues that the spreading perception that the U.S. cannot win a war is undermining its reliability as a global ally, while China strengthens its position through diplomacy and economic influence.
- China’s economy is now 60% to 70% the size of the U.S. economy, having more than tripled in size over the past 20 years. An increasing number of world leaders visiting China reflects recognition of its growing power, reminiscent of the historical "tributary system."
- Dalio emphasizes that these geopolitical shifts will increase market uncertainty, urging investors to maintain liquidity and diversify their portfolios, including investments in gold.
- In the U.S.-China AI race, China views AI as a public service tool aimed at widespread adoption, whereas U.S. companies like OpenAI focus on subscription-based revenue models and are preparing for public listings.
- Dalio predicts that China’s AI industry will follow the playbook of its EV sector, achieving global dominance through cost control and large-scale deployment, with BYD serving as a successful precedent.
Source: Wall Street Week – Dalio’s Warning&Ray Dalio on China-US AI Development
Compiled by Odaily (@OdailyChina)
Translator: Wenser (@wenser2010)
Editor’s Note: As the founder of the world’s largest hedge fund, Bridgewater Associates, Ray Dalio’s remarks have always drawn widespread attention from all sectors of society. His insights into the global macroeconomic landscape and various industries are a topic of great interest to many. Following visits to China last month by leaders including US President Trump and Russian President Putin, Dalio offered a new perspective: “The world order is changing, and a tribute system led by China is being established.” Recently, he also shared his targeted views on the “AI giant competition” between China and the US. The following content has been compiled and translated by Odaily, with some details edited for clarity.
Ray Dalio on “A World Led by China”: The Return of the Tribute System
Last month, after US President Trump and Russian President Putin visited China, Ray Dalio was interviewed by David Westin from Bloomberg’s Wall Street Week.
During the program, Dalio stated bluntly, “The credibility of the United States as a global power willing to defend its own interests is declining, while China is continuously accumulating its own global wealth and influence. This situation is fundamentally changing how other countries perceive these two nations.”
“Currently, the US has approximately 750 military bases in over 80 countries, and has long been seen as a trustworthy ally when faced with attack.” But after Dalio concluded a roughly one-month trip to Asia—including around 10 days of meetings with several leaders in China—he sensed a significant shift: a growing number of countries are increasingly believing that “the US cannot be counted on to win a war.”
Dalio’s remarks further elaborated on his long-held view: “America’s power is gradually waning, while China’s is steadily growing.” Thanks to Bridgewater Associates’ extensive engagement with China, this viewpoint has gained considerable acceptance. However, his relatively close relationship with Chinese leaders has also drawn criticism from some quarters.
Dalio then noted that international recognition is very important to China. Currently, China’s economy is about 60% to 70% the size of the US economy, a share that has more than tripled over the past 20 years. He said that while China does not seek to conquer or occupy other countries, it places great value on recognition from political leaders of other nations. “You can see that leaders from many countries are visiting China one after another. It’s similar to the ‘tribute system’ in Chinese history—countries come to acknowledge and respect China’s great power, but this system is not an oppressive or controlling one.” (Odaily Note: Original term used by Dalio was ‘tribute system’).
“So, this tribute system is essentially a hierarchical system. When dealing with other nations, what matters is how this system affects trade and national security between them. I believe, from a political perspective, we are now entering a period where arrangements resembling the tribute system will form between China and other countries, and the relative power between nations will become the decisive factor in the global political landscape.” During this discussion, Dalio also mentioned that it wasn’t until the mid-17th century that Western societies gradually developed concepts like nations and borders; before that, power structures in the West were composed of different royal families, a history quite distinct from China’s long-standing concept of frontiers.
He believes this change will directly impact global markets (including capital and finance). Investors must navigate this turbulent situation: currency values are at risk, and global uncertainty requires investors to maintain liquidity and diversify asset allocation, including investments in gold.
Ray Dalio on “China-US AI Competition”: China’s AI Industry Will Develop Like Its EV Sector
In June, Business Insider reported on Ray Dalio’s views regarding the AI competition between China and the US, also highlighting the significant differences and potential implications.
Dalio said that China views artificial intelligence as an important tool that should be accessible to all workers. “It’s like electricity and tap water—something everyone deserves to have,” he stated.
A prominent entrepreneur who first visited China in 1984, Dalio has long been bullish on the country’s development. Previously, he told attendees at a Forbes conference in New York: “China has generated huge profits through exports, and these funds have been widely invested in AI research and development, thereby driving economic growth by improving productivity.”
Notably, Dalio emphasized that while US companies like OpenAI and Anthropic are adjusting their subscription package structures and striving to increase revenue in preparation for public offerings, Chinese companies are focused on making their models available to as many ordinary employees as possible. “It doesn’t necessarily have to be expensive, and it doesn’t even have to be profitable right now.”
“In a way,” Dalio argued, “it mirrors the successful path the country took in sectors like the electric vehicle industry—Chinese domestic companies like BYD have achieved rapid growth in markets like Europe.”
During a panel discussion following Dalio’s speech, JPMorgan executive Mary Callahan Erdoes pointed out that, unlike the US social atmosphere where “employment is treated as a political topic,” when Chinese AI executives and political figures mention AI, “there is no fear of AI impacting jobs.” Instead, the country places greater emphasis on “using AI to drive various developments” and is committed to finding the next industry sector where it can achieve dominance. “The robotics sector can essentially be seen as China’s ‘next-generation electric vehicle industry,’” she said.
