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China Bets On Black(Stone)

China has been developing a plan to deal with its foreign currency reserves for some time, and in March announced the set-up of a state investment agency [1]. The latest news (timed just before the US-China dialogue) is that China is jumping on the private equity bandwagon (if you can’t beat them, join them [2]!) with a pre-IPO investment of US$3 billion for 9.9 percent of Blackstone. The FT reports:

Interestingly the political aspects of the deal seem to have been taken care of as “Washington observers said the deal was unlikely to run into political opposition, particularly because Beijing had agreed to forego its voting rights.”

According to the FT, Blackstone played a good guanxi card when it hired Antony Leung, the former Hong Kong Finance Minister, as its Greater China Chairman. It seems Leung played a key role in the deal:

So guanxi is not dead [3], big bets can pay off, and China is going to be a Player as the “go global” story opens a new chapter. And the winnings (and I assume they will be winnings) will not just be for China. I have already heard about one Blackstone-invested company that hopes the trickle-down effect will give them advantages in the China market. Long-suffering Carlyle [4]must be kicking themselves.

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