(Bloomberg) — Ray Dalio used the latest installment of his ongoing series on the changing world order to identify clear red lines that, if crossed, could result in a deadly war between China and the U.S., but the real enemy in the conflict may lie within.“Our greatest war is with ourselves because we have the most control over how strong or weak we are,” the billionaire founder of Bridgewater Associates wrote in the essay published on LinkedIn. “The internal wars and challenges in both China and the US are more important and bigger than external wars and challenges.”While Dalio doesn’t think the current trade war has been “taken very far,” any attempt by China to restrict American access to rare earth elements, or by the U.S. to restrict China’s access to semiconductors from Taiwan or crude oil, for example, could signal that the current conflict was about to get a lot worse.Culture, meanwhile, may be the one frontier where the two countries should try and make some inroads.“The main challenge the Chinese and Americans have with each other arises from some of them failing to understand and empathize with the other’s values and ways of doing things, and not allowing each other to do what they think is best,” Dalio wrote in the 17,000-word essay that also pondered the future of the U.S. dollar as a global reserve currency. “Some of these cultural differences are minor and some of them are so major that many people would fight to the death over them.”Key Quotes“Destiny and the way the global power cycle works have now put the United States in the unfortunate position of having to choose between a) fighting to defend its position and its existing world order and b) retreating”“The successes of all countries depend on sustaining the strengthening forces without producing the excesses that lead to their declines. The really successful ones have been able to do that in a big way for 200-300 years. None has been able to do it forever”“In order to prevent these from escalating out of control, it will be important for leaders of both countries to be clear about what the ‘red lines’ and ‘trip wires’ are that signal changes in the seriousness of the conflict”“Beyond the elections, a lot hinges on who wins and how they will approach this conflict. That will be a big influence on how Americans and the Chinese approach the Big Cycle destinies that are in the process of unfolding”“Regarding the trade war I believe that we have pretty much seen the best trade agreement that we are going to see and that the risks of this war worsening are greater than the likelihood that it will improve”“If the United States shuts off Chinese access to essential technologies that would signal a major step up in war risks”“Sovereignty, especially as it relates to the Chinese mainland, Taiwan, Hong Kong, and the East and South China Seas, is probably China’s biggest issue”“Perhaps the most interesting relationship to watch is between China and Russia”“The United States’ greatest power comes from being able to print the world’s money and all the operational powers that go along with that. The United States is at risk of losing some of this power while the Chinese are in the position of gaining some of it”Read More: Dalio Sheds Light on Chinese Thinking on Trade Deal: China TodayFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.,
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