A free market?!Quite simply, China is a cash cow and they’ve got too much cash.  More complex, China’s currency was long undervalued causing a high deficit between China and its trading partners.  Now China possesses a $1.2Trillion basket of foreign currencies.

The Chinese have always been foreign cash rich, but now it seems like the People’s Republic is finally getting down to making these cash reserves work and generate more cash.  Traditionally, the Chinese have had high dollar amounts in T-Bills but T-bills are very uninteresting, low paying, savings bongs.  Who cares?  We want real returns!

Insert Blackstone.  One of the most prestigious private equity companies in the world is going public.  It planned to raise $4 billion dollars through its IPO and might now raise twice that amount when the Chinese amounts get figured into the overall sales numbers.

There were rather strict investment criteria for the deal.  China agrees to hold its investment for at least four years so that the nation doesn’t cripple stock prices from a heavy sell off.  China may sell after holding the company four years but only at a rate of $1 billion per year.  Also, China gave up all of its voting rights that were tied to the shares in order to stay away from US Government intervention.  Surprisingly, China has been very co-operative with Blackstone and the US government regarding this investment.

Blackstone believes this may pave the way for further investment possibilities primarily in China where Blackstone has been the weakest.  Generally Blackstone is thought to be a US Private equity company.

The deal not only caused a ruckus on the street but also politically.  American and Chinese officials just might now meet at a round table to discussing tariffs and currency valuations -good news for US consumers.

Chinas reserves grow at a whopping $20 billion per month.  If this money were pushed into the US markets, we’d see a huge boom.  Look forward to only good news with this deal.