Kyle Bass bets against China as he cites a lack of transparency and allegations of human rights abuses as the crux to his bearish take on Chinese assets.

Kyle Bass is famously known as a China bear, and his contrarian view of China is out of lockstep with other top investors like Ray Dalio, who seeks alpha in China. 

“China controls the narrative, the money printing, the media, police, and the economy” said Kyle Bass.

“China controls the narrative, the money printing, the media, police, and the economy”

RAY DALIO

The majority of US businesses remain optimistic about China, and they are planning to increase their investments, but despite this trend, Kyle Bass bets against China

Nike’s CEO John Donahoe defended the company’s business interests in China. His view typifies the mindset of most CEOs, which is to maximize profits and shareholder value by operating in high-growth regions. “Nike is a brand that is of China and for China” said Nike’s John Donahoe.

This China-centric view rattles Kyle Bass bets against China plays

Nike does about 6 billion USD of revenue in China and 14 billion USD in the US. Nike’s job is to maximize profits. They are social justice warriors where they see fit until it affects their wallet, they will be social justice worries in the US because it is fashionable to do so.

When it comes to China, the US has accused China of committing “genocide and crimes against humanity” (against Uyghurs) their lips are sealed they become of China for China” said Kyle Bass. 

“Nike is a brand that is of China and for China”

JOHN DONAHOE

Conflict diplomacy leads to stone-throwing in glass houses

What country petrified the world by deploying atomic weapons, which vaporized hundreds of thousands of city dwellers in Hiroshima and Nagasaki within nanoseconds and leaving countless more people to die of painful injuries?  

Forced labour?

What about systemic racism in the US, the mass incarceration of black males who contribute to the prison economy working for practically nothing?

With so much US capital investments at stake US companies would prefer that the US administration dials down the political rhetoric, thereby defusing tit-for-tat actions.

“Social unrest triggered by the widening wealth gap is another reason why Kyle Bass bets against China” – Wealth Training Company

Kyle Bass’s bets against China are also based on a lack of transparency

“Chinese companies won’t submit themselves to audits” said Kyle Bass.

That may be true for some Chinese companies, but there are exceptions where Chinese companies are compliant with the rules. For example, NIO is compliant and has already appointed an independent firm to audit their financial results. Moreover, NIO files under the US Generally Accepted Accounting Principles (US GAAP), a collection of commonly followed accounting rules and standards for financial reporting, which is the accepted accounting standard adopted by the US Securities and Exchange Commission. So, if investors do their due diligence, they should be okay. 

Social unrest triggered by the widening wealth gap is another reason why Kyle Bass bets against China

Indeed, social unrest in a population of one billion-plus people could be the greatest risk to investments in China. The uprising of a population so large is like a wildfire impossible to contain.

In the fourth industrial revolution, where technology is making it increasingly difficult for humans to compete and participate in the economy, large populations could mean high political risk.