China’s Blackstone Coup

China’s $3 billion investment in the Blackstone Group, while insignificant relative to China’s $1.3 trillion of reserve assets is a test run for a new strategy of gaining small and indirect ownership stakes in a great many US enterprises. China will thus gain a measure of risk diversification, reduce the price pressure that has kept earnings on its foreign exchange reserves low, and avoid running into political trouble.

When China National Offshore Oil Company tried to buy America’s UNOCAL two years ago, it set off a political firestorm in the United States. When Dubai Ports World bought Britain’s P&O Steam Navigation Company, the fact that P&O operated ports inside the US led to more controversy in America.

One would think that a country like the US, with a current account deficit of roughly $800 billion a year, would realize that such a yawning external gap is inevitably financed only by selling off assets, which means that foreigners with money acquire ownership and control of US-based businesses. But the US – or at least Congress and the media – doesn’t get it. Americans evidently hope for a world in which they can have feckless deficit-generating fiscal policies, a very low private savings rate, and a moderate rate of investment, all financed by foreign capital whose owners are happy to bear the risks yet have no control over their assets.

One might think that foreign investors would quake in terror at these terms and shy away from dollar-denominated assets. But this has not been the case. High oil prices have created huge export revenues for Middle Eastern governments, which still want to park their earnings in American assets. The same is true of Russia, whose oligarchs, as well as the huge state investment fund that finance minister Alexi Kudrin has created, also want to invest their oil revenues in the US.

To continue reading, please log in or enter your email address.

Registration is quick and easy and requires only your email address. If you already have an account with us, please log in. Or subscribe now for unlimited access.

required

Log in

http://prosyn.org/c0Wyocx;
  1. Patrick Kovarik/Getty Images

    The Summit of Climate Hopes

    Presidents, prime ministers, and policymakers gather in Paris today for the One Planet Summit. But with no senior US representative attending, is the 2015 Paris climate agreement still viable?

  2. Trump greets his supporters The Washington Post/Getty Images

    Populist Plutocracy and the Future of America

    • In the first year of his presidency, Donald Trump has consistently sold out the blue-collar, socially conservative whites who brought him to power, while pursuing policies to enrich his fellow plutocrats. 

    • Sooner or later, Trump's core supporters will wake up to this fact, so it is worth asking how far he might go to keep them on his side.
  3. Agents are bidding on at the auction of Leonardo da Vinci's 'Salvator Mundi' Eduardo Munoz Alvarez/Getty Images

    The Man Who Didn’t Save the World

    A Saudi prince has been revealed to be the buyer of Leonardo da Vinci's "Salvator Mundi," for which he spent $450.3 million. Had he given the money to the poor, as the subject of the painting instructed another rich man, he could have restored eyesight to nine million people, or enabled 13 million families to grow 50% more food.

  4.  An inside view of the 'AknRobotics' Anadolu Agency/Getty Images

    Two Myths About Automation

    While many people believe that technological progress and job destruction are accelerating dramatically, there is no evidence of either trend. In reality, total factor productivity, the best summary measure of the pace of technical change, has been stagnating since 2005 in the US and across the advanced-country world.

  5. A student shows a combo pictures of three dictators, Austrian born Hitler, Castro and Stalin with Viktor Orban Attila Kisbenedek/Getty Images

    The Hungarian Government’s Failed Campaign of Lies

    The Hungarian government has released the results of its "national consultation" on what it calls the "Soros Plan" to flood the country with Muslim migrants and refugees. But no such plan exists, only a taxpayer-funded propaganda campaign to help a corrupt administration deflect attention from its failure to fulfill Hungarians’ aspirations.

  6. Project Syndicate

    DEBATE: Should the Eurozone Impose Fiscal Union?

    French President Emmanuel Macron wants European leaders to appoint a eurozone finance minister as a way to ensure the single currency's long-term viability. But would it work, and, more fundamentally, is it necessary?

  7. The Year Ahead 2018

    The world’s leading thinkers and policymakers examine what’s come apart in the past year, and anticipate what will define the year ahead.

    Order now