(May 16): Bridgewater Associates founder Ray Dalio said the US is losing credibility as a global power willing to fight to defend its interests while China accumulates wealth and influence, fundamentally reshaping how the rest of the world views the two nations.

“Right now, that perception is changing,” Dalio said in an interview for Bloomberg Television’s Wall Street Week with David Westin.

With roughly 750 military sites spread across 80 countries, the US was long viewed as a dependable partner in the event of an attack, Dalio said. But after spending about a month travelling through Asia, including 10 days in China speaking with various leaders, he said he sensed an important shift, with countries increasingly believing “the United States cannot be relied on to fight that war”.

Dalio spoke in the same week that US President Donald Trump met with China’s Xi Jinping against the backdrop of stalemate in the US war with Iran. His remarks amplified on his long-running view that US clout is waning against China’s, a perspective that carries weight because of his experience in China with Bridgewater, the world’s largest hedge fund — experience that has brought some criticism over his links to leaders in Beijing. 

Global acknowledgement of this new sway is important to China, said Dalio, 76. China’s economy is now about 60% to 70% as big as that of the US, a gain of more than threefold in the past 20 years. While China isn’t seeking to conquer or occupy other nations, he said, it attaches great importance to recognition by visiting presidents and prime ministers.

“You’re seeing a number of leaders go up to China,” Dalio said. “It’s like the tribute system that existed throughout history to come and recognise the differences in power,” he said.

It was a theme to which he returned several times during the interview.

“So this tribute system is a hierarchical system,” Dalio said. “The important thing in dealing with other countries is how it affects you in your trade and your safety. And so we’re now entering, and I think, in their view, a period in which there will be a tribute system type of arrangement in which the relative powers are what matter.”

The shift has direct market implications, Dalio said, as investors must navigate a turbulent period where currency values face risk and uncertainty demands liquidity and diversification including gold.