HONG KONG (Reuters) - Money managers should look beyond the United States and are worried that rivalry with China could lead to governments questioning their investment decisions, top investor Ray Dalio said on Wednesday.

Dalio, who founded hedge fund Bridgewater in 1975 and has grown it into the largest foreign fund in China, said both the U.S. and China were facing challenges but that dispute over Taiwan had raised the political stakes for fund managers.

"Most likely, there is no imminent military conflict," said Dalio, speaking virtually to the Greenwich Economic Forum in Hong Kong on Wednesday.

"(But) there are questions from international investors about whether they will experience consequences that could come from their governments. For example, American investors investing in China could experience negative consequences for that from their government," he said.

China views democratically governed Taiwan as its own territory, over the strong objections of the government there, and last month staged war games round the island.

Foreign investors, particularly from the United States, have sharply cut exposure to China in recent years.

Bridgewater's funds, however, have done well in China, growing onshore assets under management to about 40 billion yuan ($5.5 billion), and have lately tapped surging demand in China for foreign investments.

The firm's All Weather Plus fund, a yuan-denominated product that invests in stocks, bonds and commodities, posted a net return of 10.3% last year, Reuters reported in January.

U.S. presidential elections present some stark policy differences, he said, without offering specific details, while China's sluggish real estate market and unpredictable ideological landscape presented challenges there.

"Is it is it still glorious to be rich?" he said. "The continuation of market economy? How's that going to work?"

He recommended diversification, including gold and Chinese assets. "Chinese assets are very attractively priced; we've done very well operating in China in the past five years."

($1 = 7.2454 Chinese yuan renminbi)

(Reporting by Reuters Hong Kong newsroom. Writing by Tom Westbrook; Editing by Christopher Cushing and Angus MacSwan)