China expert George Magnus contradicts Ray Dalio of Bridgewater Associates about Beijing’s technical crackdown.

In a LinkedIn post earlier this month, Dalio said that investors are misinterpreting China’s crackdowns in sectors such as fintech, online tutoring and grocery delivery as “anti-capitalist.”

“The trend over the past 40 years has clearly been towards a market economy with capital markets where entrepreneurs and capitalists get rich,” said the multi-billion dollar hedge fund manager.

“As a result, they have missed what is going on in China and will likely continue to miss it,” added Dalio.

Magnus thinks Dalio is wrong. The economist, who works at Oxford University’s China Center, told CNBC on Wednesday that Beijing’s raid was all about the Communist Party’s pursuit of political “control”.

Ray Dalio, billionaire investor and founder of Bridgewater Associates, pauses during a Bloomberg Television interview at the Grand Hyatt in Beijing, China on Tuesday, February 27, 2018.

Giulia Marchi | Bloomberg via Getty Images

“I think Dalio is wrong,” Magnus told CNBC’s Street Signs Europe. “Obviously he has big business in China, so he would say that, wouldn’t he?”

Neither Dalio nor Bridgewater Associates were immediately available for comment at the time of publication.

Dalio made a number of optimistic 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 Bridgewater Associates fund has recently increased its investment in the Chinese stock market.

And despite China’s scrutiny of its vast tech sector, Dalio doubles. “Do not interpret these wobbles as changes in trend and do not expect this Chinese state capitalism to be exactly like Western capitalism,” he said recently.

China’s Communist Party is “basically driven to control these technology companies and entrepreneurs, even though they are the essence of the dynamism of the Chinese economy,” said Magnus.

George Magnus, then chief economist at UBS Warburg, speaks over lunch on April 11, 2002.

Dustin Shum | South China Morning Mail via Getty Images

Entrepreneurs like Alibaba founder Jack Ma and Tencent boss Pony Ma are said to “support the party’s goals,” he added.

China’s move to step up oversight of its tech industry began last year when comments by charismatic billionaire Ma, who criticized regulators, forced Ant Group, Alibaba’s fintech subsidiary, to suspend its proposed IPO.

Speculation about Ma’s whereabouts after months of disappearing from the public eye. According to employees, the entrepreneur is deep. In June, Alibaba co-founder Joe Tsai told CNBC that Ma was “doing well” and had “embraced painting as a hobby.”

Recently, Beijing has expanded its operations to include several other companies. Ride-hailing company Didi, which went public in the US earlier this year, has fallen 38% below its asking price due to a cybersecurity investigation by Chinese regulators.

Authorities have also targeted private tutoring services, food delivery companies and the video game industry.

“What we generally consider growth stocks and growth companies to be, they won’t and shouldn’t be traded as growth stocks because they have been politicized,” said Magnus. “In China, capital is politicized.”

“The valuation jolt we’ve seen for many stocks in China since February has been pretty permanent,” he added. “I don’t think the valuations in China, a lot of the tech stocks, should actually be where they used to be.”