Finance

Chinese liquor stocks tumbled Thursday.
Reports of an industry meeting with regulators last week raised concerns of a crackdown similar to what the tech and after-school education have experienced this summer.
Investment analysts retained their “buy” ratings on the stocks.

Signage for China Kweichow Moutai Distillery Co. baijiu liquor lines a road at the company’s facility in the Maotai section of the Renhuai District in Zunyi, Guizhou Province, China, on Thursday, April 7, 2011.
Nelson Ching | Bloomberg | Getty Images

BEIJING — Kweichow Moutai and other Chinese liquor stocks fell Thursday, on track for five-day losses in the wake of reported new regulation on the industry.
The reports come as the central Chinese government has issued a raft of new announcements in recent months, some catching investors by surprise. For example, authorities ordered app stores to remove Chinese ride-hailing app Didi, just days after its massive IPO in the U.S. Shares have fallen 41% since.

Underlying Beijing’s rush of actions — to tackle monopolistic practices among tech companies, increase data security and prevent “disorderly expansion of capital,” among others — is a theme of “common prosperity.” The vague term has emerged in political speeches as a slogan for supporting moderate wealth for all, rather than just a few.

In the traditional Chinese “baijiu” liquor industry, high-end brand Kweichow Moutai is the most expensive stock traded on the mainland A share market. Moutai is preferred by many Chinese for sealing deals at business dinners, where social drinking is ingrained.
On Thursday, state-owned Securities Times reported, citing trade publications, that market leader Moutai is trying to stabilize prices for its products ahead of the major holidays in the next two months and the price for a bottle had fallen by as much as 300 yuan ($46.40) in the last day.
Chinese media reported Thursday afternoon that Kweichow Moutai said it did not change price guidelines.
Prices for Moutai bottles have soared along with the company’s share price, to about the equivalent of a few hundred U.S. dollars. In June, a crate of Moutai from 1974 even sold for 1 million pounds ($1.37 million) at a Sotheby’s auction.

Moutai shares fell more than 4% Thursday, bringing five-day losses to more than 1.5%. Baijiu stocks had climbed earlier this week ahead of Thursday’s losses.
Other major baijiu manufacturers like Wuliangye and Luzhou Laojiao fell more than 4% each, on track for sharper losses over the last five trading days.

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On Friday, Securities Times reported the national market regulator met with members of the baijiu industry, sending stocks tumbling.
Meeting attendees said regulators focused on cooling down an overheated market — whether it was capital trying to ride the growth of the traditional Chinese liquor market or soaring Moutai prices — according to Damon Zhang, assistant portfolio manager for global capital investment at China Asset Management Co.
The market regulator did not immediately respond to a CNBC request for comment.
Zhang said in a phone interview Wednesday he expects demand for baijiu will remain “healthy” and that regulation is meant to support long-term growth. Even though a crackdown in 2012 and 2013 on corruption cut down on some demand for baijiu, he said those conducting business deals and ordinary people still enjoy the liquor during holidays like the Lunar New Year.
UBS analysts retained their buy ratings on Moutai, Jiangsu Yanghe Brewery, Luzhou Laojiao and Wuliangye Yibin in an Aug. 23 note.
“We think distributors’ aggressive stockpiling, which is encouraged by expectations of baijiu manufacturers’ price hikes, has caused unhealthy channel inventory (over 3 months per our distributor survey),” the analysts said. “We believe the regulation will aim to stop price speculations and therefore prevent further stockpiling behaviors of distributors.”
Kweichow Moutai and Wuliangye are among the top five most-invested mainland Chinese stocks by number of foreign institutional investors, including those in Hong Kong, according to Wind Information.
These institutions cut their investments in the last few weeks. Just 96 held shares of Moutai as of Wednesday, compared with 101 at the end of July, according to Wind. The data showed that during that time, foreign financial institutions holding Wuliangye fell to 91, down from 98.
“Concern on regulation risk may linger until there is clearer government policy, which could pressure stock prices in short term. But we believe regulation will lead to healthy and sustainable long-term growth for the industry, and companies with good quality should benefit,” Jefferies analysts said in an Aug. 22 note, maintaining their “buy” rating on Moutai, Wuliangye and Fen Wine.
In the last several days, top government officials and academics have pushed back on concerns that the focus of pursuing “common prosperity” was helping those with lower incomes, not robbing the rich to help the poor.

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A trader works on the floor at the New York Stock Exchange (NYSE) in New York, August 20, 2021.
Andrew Kelly | Reuters

U.S. stock futures were steady in overnight trading on Wednesday following the S&P 500’s rally that saw the index cross the 4,500 level for the first time ever.
Dow futures rose 25 points. S&P 500 futures gained 0.03% and Nasdaq 100 futures were flat.

Shares of software giant Salesforce rose 2% in extended trading after reporting fiscal second-quarter earnings and forward guidance that exceeded analysts’ estimates. Ulta Beauty also rose 6% in after hours trading on strong results.
On Wednesday, the Dow Jones Industrial Average rose 39 points. The S&P 500 gained 0.22% to close at a record, led by stocks that benefit from the economic reopening like airlines, cruise lines and financials. The 500-stock average crossed the 4,500 threshold for the first time ever on Wednesday, but closed below that level.
The Nasdaq Composite rose 0.15%, also notching a record close.
The yield on the benchmark 10-year Treasury note rose as high as 1.352% Wednesday, hitting its highest level since earlier in the month when it yielded as much as 1.364%.

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“The 10-year Treasury bond yield has continued rising in recent days and exploded higher in [Wednesday’s] trading, sending a strong message that the Delta variant of Covid may be peaking in the U.S. which should improve confidence, restart economic reopenings, and drive investment flows toward small caps and cyclicals,” said Jim Paulsen, chief investment strategist at the Leuthold Group.

The highly anticipated Jackson Hole symposium starts Thursday. At the event, central bankers could provide updates on their plan around tapering monetary stimulus. The Federal Reserve has been purchasing at least $120 billion of bonds per month to curb longer-term interest rates and jumpstart economic growth in reaction to the pandemic. Chairman Jerome Powell is slated to make remarks on Friday.
“Expect investors to keep an eye on the Fed’s symposium the rest of this week for any comments about tapering or timing for interest rate hikes,” said Paulsen. “Either unexpected commentary from the Fed or a failure or success in scaling 4500 could bring additional volatility to the stock and bond markets.”
Last week’s jobless claim data will be released at 8:30 a.m. ET on Thursday. Economists polled by Dow Jones are expecting 350,000 Americans filed for unemployment last week, compared to the prior week’s 348,000.
Several companies report quarterly earnings on Thursday including Dell Technologies, Gap, HP and Abercrombie & Fitch.

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Salesforce signage outside office building in New York.
Scott Mlyn | CNBC

Check out the companies making headlines after the bell:
Salesforce — Salesforce shares rose 3% in extended trading on Wednesday after the enterprise software maker reported fiscal second-quarter earnings and forward guidance that exceeded analysts’ estimates. Revenue increased 23% year over year in the quarter, which ended July 31, the company said in a statement. In the prior quarter revenue grew 23%.

Ulta Beauty — Shares of the cosmetic retail rose 3% in after hours trading after reporting earnings of $4.56 per share. The company made $1.97 billion in revenue last quarter, topping estimates of $1.76 billion, according to Refinitiv. Ulta also raised its full-year earnings and revenue guidance.
Snowflake — Shares of the data cloud company fell more than 2% in after-hours trading after the release of the quarterly results. Snowflake posted a loss of 64 cents per share in the second quarter on revenue of $272.2 million, missing Wall Street’s expectations. Analysts were looking for a loss of 15 cents and revenue of $256.5 million, according to Refinitiv. The stock is flat on the year.
Williams-Sonoma — Shares of the retailer soared more than 14% in after hours trading after reporting better-than-expected earnings and revenue. Williams-Sonoma earned $3.24 per share, topping estimates of $2.61 per share, according to Refinitiv. The company made $1.95 billion in revenue, higher than the forecast $1.81 billion.
Box — Shares of Box dropped 4% after the bell on Wednesday after beating on the top and bottom lines of its quarterly results. The company earned 21 cents per share on revenue of $214.5 million. Wall Street expected earnings of 19 cents per share on revenue of $212.5 million, according to Refinitiv.
— with reporting from CNBC’s Yun Li.

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There are traditional ways to hedge against inflation — things like gold and TIPS (Treasury inflation-protected securities). There are newer approaches; crypto advocates say bitcoin falls into that camp. But perhaps an unexpected way to hedge against inflation and volatility is investing in farmland. 

Jose Minaya is the CEO of Nuveen, a division of TIAA, and he’s hoping to harvest gains from investing in agriculture assets. Here he is, in conversation with Leslie Picker. 
(The content below has been edited for length & clarity)
Leslie Picker: We’ve seen some pretty scary inflation readings lately. How does farmland play into that?
Jose Minaya: You know, this is kind of part of the key reason we invested in the asset class. I think when we started looking at natural resources, the idea was, well, how do we provide better diversification for our own portfolio, looking to get better exposure to volatility or protect ourselves against volatility, and then inflation was a key part of just assuming, at some point in the future, we will be experiencing higher levels of inflation. How is our portfolio protected against that? And farmland is an asset class that we felt does both on the volatility side and the inflation side, because what attracted us to farmland and what drives the correlation characteristics is that both demand side is inelastic in terms of people need to eat and the supply side is inelastic in that they’re not making any more land around the world. And if anything, we have a reduction in land given what’s happening from an environmental perspective. And it’s a commodity that is producing at the end of the day, which is highly correlated to inflation.
Picker: Taking a look at the returns on a risk-return basis, farmland has outperformed many other asset classes, most other asset classes really, including indexes like the S&P and gold and Treasurys over the last 50 years or so. If that’s the case, why aren’t there more funds and more assets behind this? It’s my understanding that only about 80% of farmland has been institutionalized at this point. What do you think are some of the key hurdles?

Minaya: Well, if you think about farmland on a worldwide basis, I would say well over 90% of it is still in the hands of individuals and families. So it’s an asset class that is still very nascent in terms of its access to capital markets. I always compare it to real estate – we’re a large real estate investor as well – you go back 100 years, it was largely in the hands of private investors, right? And you built a building or you built real estate because you need to put people in it. Today, it’s got a lot more access to capital markets, you can get public exposure to real estate. This is kind of where I believe the path is going for farmland. That institutional ownership has increased, I think significantly over the last decade, yet it is still pretty much in private hands. So a much more inefficient market from a capital markets perspective, but again, in there lies a lot of alpha for us. It’s why we like asset classes that are not as efficient and we can drive excess returns given the risk we’re taking.
Picker: You mentioned briefly that the footprint of farmland itself is shrinking due to climate change. I mean, we hear every day on the news fires, destroying vineyards, floods, destroying farms, hot temperatures, strong storms, droughts. I mean, doesn’t all of that concern you as you put so much money behind this asset class? I mean, this asset class is changing dramatically by the year.
Minaya: I think it’s the No. 1 risk factor that we look at in farmland. One of the things for us when we decided, well, we’re investing in farmland, where are we investing it? The first one was [from a food] security perspective. We wanted to invest in the major grain exporting regions around the world – the U.S., Brazil, Australia, parts of central Eastern Europe. Again, we don’t want to deal with food security issues, we want to deal with the regions that are producing to feed the entire planet. The other piece that really ties into farmland is water and there’s different risk profiles. You can go to places that have a well-established profile for having water. Those returns are going to be a lot lower. You can have other places that are more exposed to floods at times, to droughts, to fires. Those are going to potentially be higher return for lower risk. For us, we play in that area where we know the infrastructure is in place, we have excess water, we pay for that, which is why our returns are probably more in the high single digits, mid-single digits, yet very stable with lower risks as it relates to climate change. 
Picker: Are there specific areas within farmland that you see opportunity right now more than other specific crops or regions or, or things that you’re looking at that you think provide the best risk-return profile?
Minaya: I think through growing our portfolio we found different areas of farmland – and it’s interesting –  there’s different levels of risk and return, right? Your most traditional one is, I buy land in the Midwest in Champaign, Illinois. And there is kind of the lowest risk profile … it’s where some of the best land in the world lies. What’s great about this asset class is there’s no vacancies. We don’t have to worry about, “Can this be rented?” We get paid at the beginning of the season so there are no rent defaults. So it’s a very, very low risk asset. Now, as we looked into other parts of agriculture, like vineyards, and went to places like California and said, “OK, there is no more acreage to be built here. It’s not allowed.” The demand for wine consumption is going up and what we’re seeing in the demographics. Our ability, then to look at things like vineyards then took us from a mid-single-digit return to a low double-digit return. Little bit more risk, because now you’ve got a little bit more capex to invest, but things like vineyards became very attractive. Almonds was another one where we said, “OK, here’s an end crop that is growing in demand, because the demand is from Asia.” So we can be in a place like California, where I think we’re the third-largest almond grower in the world, the demand is coming from Asia, so we can tie to that exposure of a growing demand, growing markets in emerging markets in places like China, in India, yet we’re doing it through a very safe investment in the U.S. Those are the kind of things that we found really attractive.
Picker: As an institutional investor in farmland, you are able to obtain basically a coupon or a yield from rent from the farmers who lease from you. And then you also are able to generate returns through capital appreciation. What about [the] average investor? Is there a way for anyone who’s watching this to get involved in this asset class, especially as a diversifier and inflation hedge that you talked about earlier?
Minaya: Yes, I think the first way that investors get exposure to it and it’s a very boring way, if you think about our balance sheet which offers guaranteed income through annuities, a lot of this is embedded in the diversification of that asset class. We’ve seen what’s happened now with the Secure Act and the idea that you’ll see more guaranteed income or secured income in 401(k)s – very boring – but this is the diversification that plays into, gives you access to these types of asset classes. That being said, Leslie, yes, this is still very much in institutional hands. We just launched last year our first open-ended fund that provides more liquidity. It’s now available in more retail channels and especially in the U.S. and U.S. retail, U.S. high net worth channels. So again, if you go back to real estate, that’s how it started, private hands, more institutional hands, you started seeing it more in the wealth channels. Ultimately, you saw REITs, public REITs. You’re starting to see that happen in agriculture. Again, that’s part of what we love – the fact that it’s broadly available, more inefficient, gives us more returns. That liquidity is coming and the different vehicles are coming behind it.
— Ritika Shah contributed to this article More

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A trader works on the trading floor at the New York Stock Exchange (NYSE), August 5, 2021.
Andrew Kelly | Reuters

Short selling is booming again after almost being left for dead due to the GameStop mania, reviving hope that hedge funds could turn things around in 2021.
Hedge funds’ short book generated in July the best alpha since 2010, and now it’s outperforming the long side of their strategies, according to Morgan Stanley prime brokerage data.

The rebound came after a tough start to the year when the monstrous GameStop short squeeze inflicted huge pain for short sellers betting against the brick-and-mortar retailer. As the meme stock trend spread, it caused hedge funds to close out short bets and in general take on less risk.
The outperformance in the bearish bets is good news for hedge funds that are starting to come into favor again after a decade of mediocre performance pushed cost-conscious investors away. After three straight years of outflows, hedge funds saw more than $6 billion client inflows in the first quarter, pushing the industry’s total assets under management to a record of $3.8 trillion, according to HFR data.

Hedge fund assets

Estimated assets under management

Annual net flows

Note: 2021 data is through the first quarter.
Source: HRF

Hedge fund assets

Estimated assets under management

Annual net flows

Note: 2021 data is through the first quarter.
Source: HRF

Hedge fund assets

Estimated assets under management

Annual net flows

Note: 2021 data is through the first quarter.
Source: HRF

“Investors are turning to alternative investments for consistent returns to stay in the market after a strong rally to record highs,” said Greg Bassuk, CEO of AXS Investments. “Hedge funds also have the component of downside protection against the risks of Covid and the Fed tapering.”
The stars appeared to be aligning for a hedge-fund revival. For starters, volatility has made a comeback amid a laundry list of macro risks, from a worsening pandemic to the pullback of monetary stimulus and slowing economic growth.
Meanwhile, stock correlation has fallen to an all-time low from a peak in March 2020, making an ideal environment for stock pickers, according to Bernstein.

“It is easier to pick winners and losers in an environment where stocks are not moving in the same direction in an extreme way,” Sarah McCarthy, global quant and equity strategist at Bernstein, said in a note.

Hedge funds have gained 9.2% in 2021 through the end of July, according to HFR. They are still lagging the market significantly, as the S&P 500 climbed 17% during the same period.
— CNBC’s Nate Rattner contributed to this story.

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Pedestrians pass in front of a Nordstrom Inc. store in the Midtown neighborhood of New York, on March 20, 2020.
Gabby Jones | Bloomberg | Getty Images

Check out the companies making headlines in midday trading. 
Nordstrom — Shares of the retailer dropped more than 16% despite Nordstrom beating expectations on the top and bottom lines for the second quarter. The company issued its quarterly results late Tuesday. JPMorgan downgraded the stock to underweight from neutral. The investment firm said in a note to clients that Nordstrom appeared to be underperforming even though the environment may be “as good as it gets,” creating risk to the downside for the stock.

Dick’s Sporting Goods – The sporting goods retailer’s stock hit an all-time high, soaring more than 15% after reporting strong quarterly earnings that beat estimates by $2.28. The company also announced a special dividend of $5.50 per share and a 21% increase in its quarterly dividend.
Campbell Soup — The food products stock slipped 2% following a downgrade from Piper Sander. The investment firm moved its rating on Campbell Soup to neutral from overweight, saying in a note to clients that commodity inflation, particularly for steel, would hurt the company’s earnings in the year ahead.
Toll Brothers – Shares of the homebuilder advanced nearly 4% following the company’s quarterly results. Toll Brothers earned $1.87 per share during the period, which was 32 cents above what analysts surveyed by Refinitiv were expecting. Revenue essentially matched expectations as low inventory and low mortgage rates helped the company.
DraftKings — Shares of the sports betting company rose more than 4% after Cathie Wood’s ARK Invest loaded up on 1,073,171 shares of the stock across various funds on Tuesday. The position is worth roughly $60 million based on Tuesday’s closing price.
Boston Beer Company — The beer company dropped over 4% after Cowen downgraded the shares to underperform from market perform. The Wall Street firm said that a recent downturn in the seltzer category is slowing significantly.

Urban Outfitters — Shares of Urban Outfitters fell more than 8% despite a better-than-expected quarterly earnings report. The apparel retailer posted earnings of $1.28 per share for its latest quarter, beating the 77 cents per share Refinitiv consensus estimate. Urban Outfitters’ revenue was also above forecasts. However, the company also mentioned that it is dealing with supply chain issues.
Beyond Meat — The alternative meat producer’s shares dipped more than 2% after Argus downgraded the stock to hold from buy. The research firm said Beyond Meat appears to be poised for disappointing results in the near term. It also expects concerns about the Delta variant to have a negative impact on sales.
— CNBC’s Maggie Fitzgerald, Jesse Pound, Pippa Stevens, Hannah Miao and Tanaya Macheel contributed reporting.

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House Democrats passed a $3.5 trillion budget resolution on Tuesday. It clears the way for formal legislation that can pass without a Republican vote.
The forthcoming bill will likely raise taxes on wealthy Americans and corporations, and strengthen IRS tax enforcement, to help fund the biggest expansion of the social safety net in decades.
There are already hints that writing the legislation will prove challenging for Democrats, who have razor-thin margins in the House and Senate.

Phil Roeder

The prospect of higher taxes for wealthy Americans edged closer on Tuesday as House Democrats passed a $3.5 trillion budget plan.
That framework lays the groundwork for Democrats to write formal legislation that can pass without one Republican vote. Democrats have called for higher taxes on the wealthy and corporations and stronger IRS enforcement to help fund their agenda.

The House vote sets the stage for a political showdown in coming weeks as Democrats try to pass the biggest expansion of the safety net in decades, spending more on education, paid leave, childcare, health care and climate initiatives.
Senate lawmakers passed the budget blueprint on Aug. 11, also along party lines. A Senate framework outlining the budget initiatives offers scant detail on specific tax policy relative to the wealthy, saying only that it seeks “tax fairness for high-income individuals.”
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But it’s likely the richest Americans will face higher taxes on their ordinary income, capital gains from investments and appreciated assets bequeathed to heirs, according to tax experts.
The plan would also “prohibit” new taxes on families making less than $400,000 a year, small businesses and family farms.

At the same time, the spending plan may also give a tax break to some wealthy individuals in high-tax states. It suggests Democrats will offer “relief” on the current $10,000 cap on state and local tax deductions.
Democrats aim to pass legislation using a process called budget reconciliation, which would allow the bill to pass with a simple majority. But full support isn’t guaranteed and Democrats have razor-thin majorities in both chambers. In the Senate, one defector could sink the bill’s chances. Sen. Kyrsten Sinema, a moderate Democrat from Arizona, this week reiterated she wouldn’t back a plan with a price tag as high as $3.5 trillion.

“At this point, we’re dealing with Monopoly money,” Bill Hoagland, a senior vice president at the Bipartisan Policy Center, told CNBC of the budget framework. “It’s when we actually start putting rubber to road that this’ll become a heck of a lot more difficult.”
Taxpayers who earn more than $500,000 paid about 70% of total individual income taxes collected this year, Hoagland said, citing tax-return data.

Income taxes

Raising the top marginal income-tax rate to 39.6%, from the current 37%, is the most likely way Democrats intend to raise taxes on the wealthy, according to experts.
“I think Democrats would say, ‘That’s where we were before the [2017 Tax Cuts and Jobs Act] that we didn’t vote for,'” Ryan Abraham, a principal at Ernst & Young who sits on the firm’s Washington Council, has told CNBC. “That’s not asking too much.”
Democrats would essentially be fast-tracking current policy — the top rate on ordinary income is already set to revert to 39.6% after 2025, per the Tax Cuts and Jobs Act.

As a result, the average tax rate paid by those who earn $500,000 to $1 million a year would increase to about 31% (from 27%), according to Hoagland. It would rise to 32.5% (from just over 30%) for those with income of more than $1 million, he said.
The change would raise $131 billion in federal revenue through 2026, according to a U.S. Department of the Treasury estimate issued in May.

Boosting the capital gains tax

There’s also an expectation that the top tax rate on long-term capital gains will rise.
The Biden administration proposed raising that top rate to 39.6% — the same as the proposed top rate on ordinary income — for those who earn more than $1 million a year. (Combined with a 3.8% surtax on net investment income, the top federal rate would be 43.4%.)
Wealthy individuals get a big portion of their annual income from investments — meaning raising taxes just on wages may not tax their total income as effectively as Democrats might like, according to experts.

I’d expect some increase, bringing it closer to the individual rate. But not all the way to the individual rate at all.

Bill Hoagland
senior vice president at the Bipartisan Policy Center

Those with annual income of more than $1 million get about 40% of income from investments, compared with just 5% for people who earn less than $50,000 a year, according to the Tax Foundation.
However, some experts are skeptical Democrats will be able to raise the rate on long-term capital gains (which are owed on investments held for over a year) to 39.6%.
“I’d expect some increase, bringing it closer to the individual rate,” Hoagland said. “But not all the way to the individual rate at all.”

Wealthy estates

Democrats will likely also try to change how appreciated assets held by the wealthy are passed on to heirs.
The White House, for example, proposed imposing a capital-gains tax at death, with some exceptions.
“That would be a much bigger change than just changing the capital-gains rate,” Abraham said of the proposed policy.

RubberBall Productions | Brand X Pictures | Getty Images

Currently, an asset’s appreciation isn’t taxed upon an owner’s death. The asset gets a step-up in basis, meaning it transfers to heirs at its current market value, erasing the capital gain. Heirs could then sell the asset free of capital-gains tax.
(Super-wealthy estates owe a 40% federal estate tax under current law, on values exceeding $11.7 million for individuals and $23.4 million for married couples.)
Reforms to capital-gains taxes would raise $322.5 billion over a decade, according to a Treasury estimate.

Tax enforcement

Democrats are also eyeing tax compliance to raise revenue from households earning more than $400,000 a year.
Underreported income, largely among the wealthy, is the biggest contributor to the so-called tax gap, according to a Treasury report issued in May.
The Treasury estimated the gap (the difference between tax paid and tax owed) to be $584 billion in 2019. About 80% of the gap comes from “opaque income sources,” such as partnerships, proprietorships and rental property, that accrue mostly to the rich, Treasury said.
The Biden administration has called for more third-party reporting to the IRS to improve tax compliance.

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Billionaire investor Ray Dalio said investors were misconstruing China’s regulatory clampdown on tech companies as “anti-capitalist.”
Economist George Magnus thinks Dalio is “wrong,” and believes Beijing’s crackdown is all about the Communist Party’s lust for “control.”

China expert George Magnus disagrees with Bridgewater Associates’ Ray Dalio on Beijing’s tech crackdown.
In a LinkedIn post this month, Dalio said investors were misconstruing a clampdown by China on sectors including fintech, online tutoring and food delivery as “anti-capitalist.”

“The trend over the last 40 years has clearly been so strongly toward developing a market economy with capital markets, with entepreneurs and capitalists becoming rich,” the billionaire hedge fund manager said.
“As a result, they’ve missed out on what’s going on in China and probably will continue to miss out,” Dalio added.
Magnus thinks Dalio is mistaken. The economist, who is an associate at the University of Oxford’s China Centre, told CNBC Wednesday that Beijing’s crackdown was all about the Communist Party’s pursuit for political “control.”
“I think Dalio is wrong,” Magnus told CNBC’s “Street Signs Europe.” “Obviously he’s got a big business in China, so he would say that, wouldn’t he?”
Neither Dalio nor Bridgewater Associates was immediately available for comment at the time of publication.

Dalio has made a number of bullish comments on China over the past year. In October, he warned investors not to ignore China’s rise as an economic superpower. Meanwhile, Dalio’s fund Bridgewater Associates has been ramping up investments into China’s stock market lately.
And, despite China’s scrutiny of its massive tech sector, Dalio is doubling down. “Don’t misinterpret these wiggles as changes in trends, and don’t expect this Chinese state-run capitalism to be exactly like Western capitalism,” he said recently.
China’s Communist Party is “basically driven to control these tech firms and entpreneurs, despite the fact that they are the essence of the dynamism of China’s economy,” Magnus said.

George Magnus, then chief economist of UBS Warburg, addresses a luncheon on April 11, 2002.
Dustin Shum | South China Morning Post via Getty Images

Entrepreneurs like Alibaba founder Jack Ma and Tencent chief Pony Ma are “supposed to support the party’s goals,” he added.
China’s move to ramp up oversight of its tech industry began last year when comments from charismatic billionaire Ma criticizing regulators forced Ant Group, the fintech affiliate of Alibaba, to scrap its planned initial public offering.
Speculation mounted over Ma’s whereabouts after he disappeared from the public eye for months. According to associates, the entrepreneur is lying low. In June, Alibaba co-founder Joe Tsai told CNBC Ma was “doing well” and had “taken up painting as a hobby.”
More recently, Beijing has extended its crackdown to several other companies. Ride-hailing firm Didi, which went public in the U.S. earlier this year, has fallen 38% below its offering price on the back of a cybersecurity probe from Chinese regulators.
Authorities have also targeted private tutoring services, food delivery firms and the video games industry.

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