Hopefully it won't be Blackstone all over again, thinks Gao Xiqing. With Visa's IPO barely a week old, China Investment Corp. (CIC), the state-owned forex reserve investment arm of the Chinese central bank, is dipping its hands in US equity markets once again. Who knows what luck will bring? Maybe a bargain...or maybe a Bear Stearns. CIC manages over $200 billion in assets, and plans to invest $100 million of its wealth into Visa. According to Reuters: "Because of the subprime crisis, the value of financial assets in the United States has fallen to a more reasonable range, which creates a fairly good opportunity for China to invest," said Li Ruogu, president of Export-Import Bank of China. But who can forget the fallacies of Blackstone, a then-highly hyped but naive move? Experience doesn't come overnight.
Although a Tsinghua University professor and chief China economist at JPMorgan said that China should move fast this time around (rather than its usual slow pace marred by exessive red tape) to garner some of the best western business/financial deals this century, CIC seems rather laid back. Why? Partly because even if we filter the Blackstone fiasco out of our minds, the Barclays deal wasn't the most profitable investment by CIC either. There are better deals domestically, even at the cost of driving multiples up like no other. Not to mention that CITIC Bank almost went for Bear Stearns, which at the moment is not the most outperforming company in the world. If we played out an alternative history, CITIC would have lost $1 billion by now, thanks to JPMorgan's lovely bid of single digit dollar per share. Luckily Chinese regulators acted slow and saved CITIC from its demise. Slow may never be good, but better Caution than Lust.
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