China to Invest in Blackstone Group Hedge Fund

May 21 (LPAC) - China's new foreign exchange investment company has agreed to put US$3 billion into the Blackstone Group hedge fund, Xinhua reported today. The China Jianyin Investment Limited (China Jianyin), which is still not formally founded, released a joint press statement with Blackstone yesterday on the deal. Wang Jianxi, chairman of China Jianyin, said they will buy an under-10% non-voting stake in Blackstone, at the same time that Blackstone launches its US$4 billion IPO in mid-June.

The worst part of this move is giving backing to the voracious hedge funds. The amount is a small part of China's huge $1.2 trillion in forex reserves, the biggest in the world. IMF managing director Rodrigo Rato said at a G8 Finance Ministers meeting May 19, that he is not concerned that this means any real move by China away from the U.S. dollar and US Treasury bonds, where the biggest part of its forex has been invested. Rato said this was a measure to "diversify their investments," and not "extraordinary." Countries with big forex reserves are particularly interested in stability in currency markets, he said.