(Yicai Global) March 2 -- Productivity changes can be more important economic indicators than deleveraging, said the founder of the world's largest hedge fund in a recent interview with Yicai Global, adding that China's deleveraging may take some time but its negative impact is not significant and the overall process can be well managed.
There are four ways to make deleverage, said Ray Dalio, founder of Bridgewater Associates during a recent visit to Shanghai. Restructuring can be used to dissolve the debt, while the central bank could also start buying assets to inject liquidity into the market. Other means of deleveraging are government cuts and the redistribution of wealth.
"The key is how to balance the four approaches because some measures will promote inflation and some cause deflation," Dalio said, adding that balancing inflationary and deflationary effects is key for deleveraging.
When it comes to Europe, Dalio said US stocks are more attractive than that of Europe. The Federal Reserve is now in the process of withdrawing from quantitative easing and downsizing the balance sheet, but the European Central Bank has not yet done so. It will not raise interest rates in the near future and interest rates will not change much.
Because the Trump administration’s tax reform has also provided great fiscal stimulus, the U.S. economy should see an upward trend. The European stock markets do not have such a fiscal stimulus. Therefore, the U.S. stock market will fare better, he added.