Ray Dalio, founder of investment firm Bridgewater Associates, speaking at the WEF in Davos, Switzerland on Jan. 22, 2019.

Hedge fund titan Ray Dalio said he wouldn't rule out China using its Treasury holdings to gain an upper hand against the U.S. in the trade war — a view that contrasts with many other observers.

"We have a debtor-creditor relationship, not just a trade relationship. And (that) can be a dangerous thing," Dalio, founder of the world's largest hedge fund Bridgewater Associates, told CNBC's "Managing Asia" in Singapore.

When repeatedly pressed on whether Beijing could weaponize its ownership of U.S. Treasurys, Dalio responded: "I wouldn't rule it out."

Analysts and investors have said that amid escalating trade conflict between the world's two largest economies, China could resort to the so-called nuclear option to hurt the U.S.: Selling its large Treasury holdings. But many dismissed that suggestion, saying such a move will harm China too.

China was the largest foreign holder of U.S. Treasurys until June, when it was surpassed by Japan. According to data by the U.S. Treasury department, China held $1.11 trillion of U.S. debt in June.