BEIJING - In a
symbolically powerful move that may signal the begining of
a trend, China's state foreign-exchange investment
company has agreed to invest US$3 billion in
Blackstone Group, a US private equity firm.
This is the first known investment
under China's plan unveiled early this year to use
part of its over $1 trillion foreign-exchange reserve
for overseas investment.
Blackstone co-founder
Stephen Schwarzman is among those who
expects to see the Chinese
put large amounts of its foreign exchange reserve
into liquid securities.
"Blackstone is the
first, but over time I would suspect there would
be others," he told the Sydney Morning Herald.
"To
the extent that the state investment company stays
below the 10% threshold for governmental review
... and invests in securities
that are liquid, which this security eventually
will be, that's a very easy way for the state
investment company to put large amounts of money
to work with minimum to no controversy,"
Schwarzman said.
Wang Jianxi,
chairman of China Jianyin Investment Ltd,
told Xinhua on Monday that under an agreement
signed on Sunday, the new state forex investment
company will buy a non-voting stake worth less
than 10% of Blackstone.
China Jianyin, a
state-owned investment company, will be merged
with the new state forex investment company.
The deal will be closed concurrently, with
Blackstone's $4 billion initial public offering
(IPO) to be launched in mid-June.
The
Chinese investment company will buy the shares at
95.5% of the IPO price and hold them for at least
four years.
"We are very pleased to make
the state investment company's very first
investment in such a well-respected firm as
Blackstone," said Lou Jiwei, who is in charge of
setting up the new investment company.
Schwarzman, chairman, chief
executive officer and co-founder of Blackstone,
said: "We are pleased to welcome the state
investment company as an equity owner of our firm.
We are proud to be part of such a significant
transaction for both of our organizations." The
deal is "purely commercial" and does not need US
government approval as the stake is less than 10%,
said Schwarzman.
The Blackstone Group, a
leading provider of financial advisory services, is one
of the largest independent alternative-asset managers
in the world.
The Chinese investment
company will not affect the structure of
Blackstone as its stake is in non-voting shares,
said Wang, adding that the deal is a
market-oriented decision made by the investment
company with the goal of seeking higher earnings
with acceptable risks.
As one of the core
investors, the state forex investment company
expects to gain profits from the private equity
firm's investment and rise in share prices, Wang
said.
He noted that the forex investment
company, which is expected to go into operation
this year, may also entrust its forex capital to
other world leading asset management firms.
Chinese Premier Wen Jiabao said
at a press conference in March after the
closure of the annual session of the
National People's Congress, China's top legislature, that
the country would establish a foreign-exchange investment
company that would not be affiliated with any government
department or institution.
The
company, which would be subject to supervision, is charged
with operating investments in line with state laws
to preserve and increase the value of foreign
exchange reserves, said Wen.
By the end
of March, China's foreign-exchange reserves had
jumped 37.36% from a year earlier to exceed $1.2
trillion, mainly invested in low-yielding dollar
bonds.
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