The US Blackstone Group would receive the US$3 billion which is
to be invested by China's state foreign exchange investment company
"shortly after its public offering," the Chinese company said
Friday.
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According to the deal struck between the two sides, the Chinese
investment company must hold its shares for at least four
years.
The state forex firm agreed to buy Blackstone shares at a 4.5
percent discount on the IPO price -- set at 31 dollars a piece, a
source with the soon-to-be-established Chinese firm said
Friday.
Blackstone said it will use the funds raised in the IPO to buy
back some equities from its old shareholders, repay short-term
loans, and invest in current as well as new businesses.
Although the deal has been widely welcomed by Wall Street, some
US lawmakers, in a throwback to the Cold War, urged the US Security
and Exchange Commission (SEC), the Department of Treasury and the
Department of Homeland Security to delay Blackstone's IPO due to
what they called national security reasons.
In a letter to the SEC and the other two departments, Democratic
senator Jim Webb said "in making this request, I express my concern
regarding the enormity of this public offering and the large
investment from a foreign government."
However, the SEC ignored his proposal and approved Blackstone's
IPO, saying an IPO may be delayed only if a company had issued
"material misstatements or omissions."
As one of the core investors, the state forex investment company
expects to gain profits from the private equity firm's investments
and from a rise in share prices, Wang Jianxi, Chairman of the China
Jianyin Investment Limited (China Jianyin), said earlier in
May.
China Jianyin, a state-owned investment company, will be merged
with the new state forex investment company.
He noted the forex investment company, which is expected to go
into operation this year, may also entrust its forex capital to
other world leading asset management firms to seek higher
earnings.
By the end of March, China's foreign exchange reserves had
jumped 37 percent from a year earlier to exceed US$1.2 trillion,
which are mainly invested in low-yielding US dollar bonds.
China's top legislature is to discuss an issuance of special
treasury bonds by the Ministry of Finance for the country's foreign
exchange investment at a six-day session beginning on June 24.
Apart from its role in reducing excessive liquidity, the bond
issuance will also help to buy foreign reserves from the central
bank to finance the investment of the state foreign exchange
investment company, said Li Yang, director of the finance research
institute of the Chinese Academy of Social Sciences.
(Xinhua News Agency June 23, 2007)