We are long since used to the sight of US companies falling over each other
to compete for the privilege of being able to invest in China. Part of this
is because they see large returns down the road, but another important part
is because they feel that having Chinese investments will bring them closer
to the all-important Chinese government.
It turns out that they were going about this entirely in the wrong way. Rather
than invest in state-owned Chinese banks, Goldman Sachs should have been persuading
the state-owned Chinese banks to invest in it!
Steve Schwarzman is the man who we can credit both for having this insight
and for having the geopolitical clout to be able to act on it: he’s selling
the Chinese a $3
billion stake in Blackstone, at a tiny 4.5% discount to the IPO
price. The Chinese are now literally invested in Blackstone’s ability to
do deals in China, which must make Schwarzman very happy indeed.
But what’s in this deal for the Chinese? As Naked
Capitalism notes, the Blackstone IPO is very controversial, and there’s
a great deal of regulatory risk surrounding the deal structure.
One can only assume that if the Chinese are taking large stakes in individual
companies like Blackstone, they’ve been investing in US equities more broadly
for some time. If they’ve reached the limit of their comfort level with public
equity, it might make sense to have some kind of exposure to private equity.
But even then, one would expect the Chinese to be investors in a Blackstone
fund, rather than investors in Blackstone itself. And in any case I’m far from
convinced that China has a big stake in the US public equity markets. It seems
that there’s something else going on here, but if there is, then Schwarzman