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China invests in Blackstone May 22, 2007

Posted by fukumimi in Economy & Business, Finance, History, Japan.

China is putting $3B into Blackstone which is preparing to IPO. (Times)

This is the tip of the iceberg. The same article goes on to say that $200B is earmarked for overseas investments.

Jin Renqing, the Finance Minister, has said that one of its models would be Singapore’s state-owned Temasek Holdings, which invests in a broad range of industrial and financial assets at home and abroad, including Chinese state-owned banks.

I’ve been saying privately to anyone who wants to listen (and to many who probably don’t) that Japan should be embarking on a similar strategy with a strategic fund which is aligned to Japanese interests and strengths. (I suspect the best way would not be to get the government to do it themselves, otherwise it will end up being another exercise in futility, staffed by clueless academic “experts” and others who will be busy trying to divert money to their (and their supporters’) interests as is so often the case)

I don’t think putting money into funds controlled by interests not necessarily aligned with Japanese interests is the way to go (but then I’m sure it was a cheap way for China to get in the current US regime’s good books – after all Swarzman and Bush Jr were dorm mates at Yale – China isn’t stupid), but the country needs a well financed fund to a) keep key Japanese interests from being transferred to competitive hands outright (such as this one, but even moreso the other business units belonging to same), and b) to take a stake in overseas assets which are aligned with the future direction of the Japanese industrial base. (I’m thinking strategic technology and access to resources (energy, raw materials, logistics))

Japan’s foreign currency reserves are only $900B (according to the IMF) compared to $1.2Trillion for China, but there is another $2.1Trillion sitting in the Japan Postal Savings system, more than half of which are in low yield Japanese Government Bonds. It would seem that it would be in the government’s interest to put some of that into play.

Give me and my buddies $100B or so to go to work with, and I’m confident that we can return more money to the Postal Savings system than the current investments, whilst simultaneously strengthening Japan’s strategic position. Hell, even with just $10B and taking strong positions in venture businesses and SMEs I can see a lot of opportunities. I’m sure some of the big industrial companies and financial groups would be willing to pitch in a little money, after all they seem to be perfectly fine financing overseas funds in a similar fashion.

I’ll even offer to work on a miniscule management fee. The fee depends on the focus of the fund, but I think Japan needs new hands-on players in the VC scene (ie people with a nose for technology who are with the programme and not playing the game 6~24 (or more) months behind the global leaders), as well as in the bigger PE sector. If that is the case, it’ll need more than a handful of people to manage of course. Still, I’d have absolutely no interest in trying to get rich off management fees, nor do I feel the need for a corporate jet.
I’m not holding my breath for the Japanese government to come knocking on my door, although there are certain individuals (ok, one) making the right noises.


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