Blackstone’s Schwarzman expects ‘much less tension’ with China under Biden

Speaking at the Asian Financial Forum on Tuesday, the Blackstone founder said it seemed 'exceptionally odd and unproductive' for the world’s two largest economies not to co-operate.

Schwarman: I expect a softer tone

Blackstone founder and chief executive Stephen Schwarzman expects US tensions with China to soften under the incoming Biden administration.

Speaking at the Asian Financial Forum on Tuesday, Schwarzman said it seemed “exceptionally odd and unproductive” for the world’s two largest economies not to co-operate with one another.

“I’ve heard rumours that there will be some type of working-level conversations between China and the US in February, maybe involving a trip,” he added.

“It will take some time but I think in areas like climate, health, terrorism, as well as some economic issues […] there’s a really, very substantial overlap in the interests of these countries and the interests of the world, so I expect to see much less tension. It would be hard to imagine escalating tension from here, frankly.”

On Tuesday, Antony Blinken, Biden’s nominee for secretary of state, told a confirmation hearing at the Senate Foreign Relations Committee that he agreed with Trump’s tougher stance on China but disagreed with the methodology. Blinken pointed both to “rising adversarial” and “some co-operative” elements in the US-Sino relationship.

“There’s still a variety of issues, particularly in the Congress – which is our legislative body – where there are genuine differences between US and China,” Schwarzman noted. “However, I think the new administration is going to take a softer tone for places where we can work together as the two largest countries in the world.”

Discord between the two governments has threatened to spill over into private markets. Last year, President Trump ordered the Federal Retirement Thrift Investment Board, a US government agency that manages $594 billion, to halt plans to back an index containing Chinese stocks because of national security concerns. In August, the US Department of State warned university endowments to divest from Chinese stocks in case enhanced listing standards spark a wave of de-listings from US exchanges.

Market participants in Asia warned last year that uncertainty around trade tensions, concerns around exposure to technology and heightened scrutiny from the Committee on Foreign Investment in the US had impacted fundraising activity for Chinese GPs.

“Some of our clients have had to postpone their fundraising period from a very aggressive six-month period to 12 months, or even longer,” Lorna Chen, Asia regional managing partner and head of greater China at law firm Shearman & Sterling, said at the Hong Kong Venture Capital and Private Equity Association’s annual conference in January 2020.

“Their US pension plan LPs, for example, have told them that, even though they wanted to roll up… to Fund II or Fund III, they’re now sitting on the borderline because they’re not sure whether they would be allowed.”