The U.S. Blackstone Group would receive the 3
billion U.S. dollars to be invested by China's state foreign exchange investment
company "shortly after its public offering," the Chinese company said Friday.
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 U.S.
lawmakers, in a throwback to the Cold War, urged the U.S. 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
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
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 1.2 trillion U.S. dollars, which are mainly
invested in low-yielding U.S. 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