/Blackstones Schwarzman sees plenty of momentum for China trade deal ahead of election

Blackstones Schwarzman sees plenty of momentum for China trade deal ahead of election

Stephen Schwarzman, head of Blackstone Group Inc., the world’s largest alternative asset manager, says he sees a short window for the United States and China to reach a trade deal.

“There’s a relatively short fuse to get something resolved before the U.S. elections (next November), which I think both countries would like to do,” said Schwarzman, whose private equity firm’s relationship with China dates back to 2007, when a precursor to that country’s sovereign wealth fund became an investor in his firm. “There’s a lot of momentum to do a trade deal.”

In an interview Wednesday with the Financial Post, Schwarzman called the U.S. tariffs imposed on China “a bit of a pile-on” for a country that was already experiencing slowing economic growth.

As for the on-again, off-again talk of a deal being reached over the past several months, Schwarzman said there appears to be some reluctance in China to end policies that had led to double-digit economic growth.

“They’ve got their hard liners, who don’t want to change at all, (and) they have their reformers who recognize they have to,” he said.

Schwarzman was in Toronto on Wednesday to speak at a Canadian Club luncheon and promote his book What It Takes. In it, he describes being actively involved behind the scenes in the negations for another trade agreement —  the 2018 trade deal between the United States, Canada and Mexico — even advising Prime Minister Justin Trudeau on how to get the deal done and avoid a Canadian recession that could jeopardize his chances of re-election.

During the interview with the Post on Wednesday, Schwarzman said he believes concerns about China’s economic growth being unsustainable are overdone.

The country has taken steps to deleverage, he said, and has ramped up the focus on its consumer sector.

“The concept of China collapsing or something like that is completely incorrect,” he said. “It’s just slowed its growth.”

Blackstone continues to manage money for China Investment Corp., though the sovereign wealth fund had sold off its investment in the firm by 2018.

The concept of China collapsing or something like that is completely incorrect,

Stephen Schwarzman

Schwarzman described his involvement with the sovereign wealth fund as a “happy accident” that occurred just ahead of Blackstone’s planned initial public offering.

It started with a phone call from a new partner, who, while in China at a board meeting, had been summoned to meet with two former senior officials from China’s government and central bank.

“He called me at home around 10 or 10:30 at night, I was watching Law and Order,” Schwarzman recalled, adding that it took him a while to grasp the importance of the “two unemployed people” who wanted to invest.

“He said, ‘Steve, this is China Inc.… It’s China the country, the country wants to invest.’”

The added investment of $3 billion required expanding the size of Blackstone’s IPO, making it the second largest at the time next to Google Inc.

“As slow-moving as I am, even I recognized that this was a huge strategic initiative by China where they were basically saying they were going to open themselves to the world and start recycling the huge amount of savings they had, and foreign reserves,” Schwarzman said.

“And so we found a way to do that.”

Financial Post

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