5 major challenges that have China headed for a '100-year storm,' according to billionaire investor Ray Dalio

• There are five major trends that have China headed for a "100-year storm," according to billionaire investor Ray Dalio.
• They include a big debt problem, a growing internal wealth gap, and increasingly fraught foreign relations with the US.

There are major economic and geopolitical challenges brewing a "100-year storm" in China, says billionaire investor Ray Dalio.

In a LinkedIn post from Wednesday, Dalio listed five major forces casting a shadow on Beijing, detailing headwinds that he says have been building up over the past four decades.

"When there is a lot of debt and big wealth gaps at the same time as there are great domestic and international power conflicts and/or great disruptive changes in nature (like droughts, floods, and pandemics, which China is especially prone to) and great changes in technology, there is an increased likelihood of a '100-year big storm,'" Dalio wrote. "That is the current environment in China."

First, the (1) debt problem. China has been mired in a property crisis for the past few years which has hamstrung its economy by sending real estate prices, asset prices and employment in a downward spiral. On top of that, the country has an aging population which is weighing on the financial system, especially under the legacy of the one-child policy. Those trends are depressing economic activity, prices, and psychology, Dalio said.

Then there's a (2) growing internal wealth gap which has spurred the government to push for more "common prosperity," Dalio said. The shifting policy focus has been "fear-inducing, he wrote, which has additionally soured the mood in China.

Next, there's the increasingly fraught foreign relations with the US. The (3) power conflict between the two countries has bled into investor sentiment, steering money away from China. Businesses have been caught in the crossfire too, trying to appease the US.

"In trade and capital flows, a cat-and-mouse game has developed that has led companies and people to move to neutral countries and to try to appear to be non-Chinese or not Chinese sympathizers, so much so that the Chinese are having problems getting other countries and companies to accept them being there and/or investing in them," Dalio wrote.

Kindled by that conflict, China is also dealing with a (4) technological war with the US, Dalio wrote. Both countries are pouring money into technologies from AI to quantum computing, each trying to get the lead over the other, he said.

Finally, there's the (5) risks of climate change, carrying implications from floods to droughts to pandemics, all of which will cost a lot.

"The circumstances and the mood in China have indisputably changed to become more threatening," Dalio said.