- China investor Ray Dalio encouraged the US and China to agree on mutual red lines if war breaks out.
- He said they can agree to not fight on each other's lands, or kill each other's troops, he said.
Billionaire Ray Dalio is urging the US and China to agree upon clear rules of engagement if war breaks out between the two nations.
Dalio, who runs the largest foreign hedge fund in China, wrote a cautionary LinkedIn post on Thursday describing his fears that the two great powers are teetering on the edge of war.
The investor, who has 40 years of experience with China, said he drafted the post after recently meeting with Chinese citizens, policymakers, and experts on Beijing.
Dalio said that in the event of war, Beijing and Washington should consider drawing lines — like agreeing not to kill each other's military personnel directly, or vowing not to fight on each other's lands.
He also suggested that both sides can agree not to use nuclear, cyber, or space-based weapons.
"It is hoped that in that way, if there is war, it will be contained," Dalio wrote. He cited the war in Ukraine as such a contained conflict.
"But such a contained war is not the worst-case scenario because history has shown that when conflicts have reached this stage 1) they have terrible economic consequences and 2) there is a high risk of moving from a contained war to an all-out war," Dalio added.
Dalio did not elaborate on what a direct US-China war that doesn't involve American and Chinese troops killing each other would look like. But in his post on Thursday, he repeatedly mentioned tensions over Taiwan as a dangerous flashpoint.
US lawmakers have, in recent years, reinforced ties with Taiwan through multiple high-profile visits and statements, while Chinese leader Xi Jinping has made absorbing the self-governed island a key goal of his rule.
The US has refused to say if it will defend Taiwan in the event of a Chinese invasion, but sells weapons systems to Taipei.
Even so, "almost all" the policymakers Dalio spoke to are "scared of war," the billionaire wrote.
"Both sides have been very clear that they recognize that either an economic decoupling or a military confrontation would be disastrous, while they are testing each other's limits," he wrote.
Dalio recommended several ways the US can reduce tensions with China, such as inviting Xi to San Francisco for the November APEC meeting, or sending a delegation of senators to Beijing.
But the 2024 US election is likely to spur politicians to lean into hawkish stances on China, as they seek to appeal to voters who want the US to stand up to Xi, Dalio added.
A representative for Dalio did not immediately respond to Insider's request for comment sent outside regular business hours.