China: Trading Greenbacks for Black(stone)

Up until now, the Chinese government's upside in the US economy has been largely limited to the billions -- or maybe it's even trillions, by now -- in dollars and debt it holds. But perhaps bitten by the falling value of its preferred foreign reserve currency, the Chinese are diversifying -- in a major way. Over the weekend, the Chinese government agreed to take nearly a $10 billion stake in Blackstone, a US private equity group. According the Financial Times, the $3 billion investment "underlines Beijing’s desire to tap into the private equity boom ... under the terms of the deal, which is believed to have been agreed in just a few weeks, the Chinese government has taken the unusual step of giving up its voting rights associated with the stake in Blackstone."

Even from a transactional perspective alone, I find this deal fascinating. But I also wonder if there's another, quieter side to the deal. Perhaps Blackstone's portfolio companies will gain some advantages in accessing or sourcing from the Chinese market. Nothing formal, mind you. But in a society where relationships matter more than anything else -- and where there is often a very blurry line between private and public sector investment -- there's got to be more to this than meets the investment eye.

Jason Busch

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