EuroLinks Daily View: Blackstone Stake Is Just The Beginning for Beijing's Billions
China's move to take a $3 billion stake in U.S. private-equity giant Blackstone Group marks an unusually aggressive start to the country's long-anticipated campaign to diversify how it invests its massive $1.2 trillion foreign-exchange reserves. The deal is expected to be completed alongside Blackstone's announced $4 billion initial public offering of a 10% stake in the firm.</br></br>News of China's planned Blackstone stake comes as U.S.-China economic talks are about to begin in Washington, led by U.S. Treasury Secretary Henry Paulson and Chinese Vice Premier Wu Yi. The run-up to the talks has been dominated by U.S. complaints about China's currency, which many Washington politicians say is kept artificially low to give Chinese exports an unfair advantage.</br></br>Chinese leaders have repeatedly said they want to reduce the country's trade imbalance with the rest of the world, which contributes to inflationary pressures at home as well as to trade frictions abroad. As Kate Linebaugh and Andrew Batson report, an investment in Blackstone would be one way for China to show it is willing to increase its flow of dollars to the U.S. to try to balance the flood of dollars into China.</br></br>Meanwhile, a rare change to China's currency regime unveiled Friday ahead of this week's Washington talks has done little to appease the country's critics abroad, but new financial tightening measures, including an interest-rate increase, could help with another of Beijing's priorities: calming the frenzy in its stock market.</br></br>---