New York (HedgeCo.net) – The World Economic Forum kicked off in Davos last week and one of the hot topics is whether or not China’s policies and economic slowdown could cause a global deflationary period.

Two legendary hedge fund managers certainly seem to think that it is a real possibility, if it isn’t happening already. In a recent article from Business Insider, Ray Dalio, the founder of Bridgewater Asset Management, tackled the subject. “I think the Chinese situation with the currency is very important,” said Dalio. “If there is significant currency weakness for the yuan that will mean more imported deflation, and it will make things more difficult.”

Dalio wasn’t the only one pointing the finger at China for recent global market volatility. George Soros called China one of the “three major root causes” of global deflation. Soros stated that falling commodity prices and currency devaluations were the other two. As the article from Business Insider pointed out, China could be involved in both falling commodity prices as well as currency devaluations.

Rick Pendergraft
Research Analyst
HedgeCoVest