Investor who knows to get about business

Blackstone chief sets up multimillion dollar scholarship program in Beijing

Here comes the million dollar question: How does one find reliable information for investment decisions in China?

Stephen Schwarzman, CEO and co-founder of the Blackstone Group, one of the leading investment firms of the world, has got it easy, because he found that the Chinese, much like Americans, are quite open.

"They tell you what's going on, or at least what they think is going on, and so you need to talk to a variety of different people to get a consensus," he says. But he warns: "It's a bit like an adventure, because no one person knows everything."

To help future leaders have a deeper understanding about the world's second-largest economy, Schwarzman is setting up an eponymous one-year scholarship program at Tsinghua University in Beijing.

He has personally contributed $100 million to the program and is leading a campaign to raise an additional $300 million from private sources as endowments for the master's degree program.

The program has received more than 3,000 applications for its first class of 100 next year, which will include approximately 45 Americans, 20 Chinese and 35 students from across the world.

In an interview with China Daily, Schwarzman spoke about the outlook for the Chinese economy, his company's business and his school project in China. The following are edited excerpts of the interview.

How does China figure in Blackstone's picture?

Blackstone is the largest money manager in the alternative investment area operating in China. The country is very important to Blackstone. China is the future. Even though some people wonder how much it is growing, it is still much faster than the developed world.

Things change so rapidly in China; nothing remains the same. So for us to be effective in the rest of the world, it is essential to know what's going on in China.

What do you think about China's economic slowdown?

Everybody worries about an economic slowdown - from the top levels of the Chinese government to the business community to the IMF to the World Bank to the head of almost every country in the world worries about China's economic health - because it is the second-biggest country (economy) in the world, and it is the fastest growing of the emerging markets with the exception of India, which is probably growing a little bit faster.

So, all of us are concerned about China's growth. It's an area of enormous focus and fixation because no one knows exactly what's happening within China.

I think China will not have a hard landing. I think China will continue outperforming certainly any other developed country. Some sectors will grow fast, some won't grow at all, and a few will go down. You have to have a balanced view of what will happen.

What are your business strategies in China amid a slowing economy?

As long-term investors, we see great opportunities to invest during periods of slower growth. For private equity and real estate our strategy is to be patient and be highly selective in the midst of a slowing and generally more challenging environment in China, with a focus on sectors with long-term secular growth prospects such as technology/IT services, healthcare, commercial real estate, and retail.

We also believe that as the scale of companies continues to get larger in China and as Chinese companies become more global, that there will be a continued need for operational expertise. We bring a very differentiated set of capabilities along with our capital to support Chinese companies in their growth.

What's the greatest challenge for your business in China? How do you deal with it?

In China you have to make sure you are in the right sector, because it used to be everything in China was growing, and now it is no longer the case. Certain sectors are growing very rapidly and are great to be in; other sectors, like steel, are not.

We, for example, are in the shopping mall business, among many things that we do. Our shopping mall business oriented to the middle class in China is growing very rapidly. Totally unlike what people in the West think is happening to China. We are growing approximately 16 percent a year in terms of same-store sales. In other words, more customers come in and buy more things. That's a very strong growth, so that's a good thing to do. There are a variety of areas in China that are not very healthy, but then there's the medical business, which is doing very well. So, you have to be careful and focus where you want to be active.

Tell us about your good or bad investments in China. And what advice can you give to other investors?

We have invested selectively in China and will continue to do so. But whether we're putting capital to work there or anywhere else, I always approach investing as a doctor would - do no harm. The first rule is don't lose money. And even with a slowdown, it's important to remember China is still growing at 2-3 times the rate of the United States. For example, our funds own approximately 30 shopping malls that cater to the middle class in China, and we have seen a year-over-year increase in sales there of 16 percent. So opportunities are out there if you're smart and selective.

Why did you set up the scholarship program at Tsinghua?

Since 1500, the last 16 times when a rising power has challenged an established power, the result has been war between the two. That outcome is to be avoided at all costs.

The probability of successfully avoiding such conflicts has been very low in history, but I want to see that change by having future leaders around the world going to China, meeting the leaders of China, having mentors from Chinese society and the student's areas of study, traveling to different parts of China, as well as studying a curriculum that involves China.

When people know how other systems work, and when they know people there, their ability to interpret what's going on in that country is infinitely better.

And if we can establish those types of links with super achievement-oriented younger people who take their places in their own society, then we can go a long way to change the outcomes between China and the outside world.

Both China and the US are quite similar. They are both very big countries, which are geographically isolated and protected. Neither of the two countries are typically interested in taking territories of other people, and people in those countries usually just speak one language.

So they're fundamentally self-reliant, isolated despite their huge scale and presence in the world. That similarity is a good thing, but you need bridges built between the people, and you need someone to interpret what's going on in each of the two giant countries.

I think a program like the Schwarzman Scholars is essential for helping that bridge-building process.

What qualities are you looking to see in successful candidates?

They need to have good grades, great intelligence. They need to be flexible, need to be insightful. They need to be people who like to make changes. And they need to have courage.

What are the most impressive cities in China that you have visited?

Actually, I'm a bad interviewee for you because I find all of them interesting due to their different industries and characteristics.

If you go to Hangzhou, it's very beautiful - the lakes and the history. That is quite different from Shanghai where the people are always on the move - traders, smart business people - which is different from Beijing, where the pace is a little slower and more deliberate, but still huge and interesting.

Contact the writers through hezijiang@chinadaily.com.cn

(China Daily Africa Weekly 12/11/2015 page20)