From Socialist Voice, September 2010

Private equity turns to Chinese currency


An interesting development is now under way in the murky world of private equity firms and investors. Where previously these funds kept their billions and counted their assets almost exclusively in dollars, a number of important private equity firms and hedge funds are turning to the Chinese currency, the yuán, to secure their capital and make future investments.
     TPG, one of the world’s largest private equity firms, with about $57 billion in assets, recently launched an all-yuán fund, the world’s first fund denominated entirely in the Chinese currency. In addition to this the massive private equity firms Blackstone Group and Carlyle Group have begun raising funds in yuán.
     Does this signify the end of the dominance of the dollar? It’s too early to tell; but when combined with a historical view of economics and with the underlying weaknesses of the American economy, with its massive deficits and loans from the Chinese, it certainly reflects a significant power shift towards China.
     The New York Times quoted analysts as saying that private equity and finance is increasingly looking to the fast-growing Chinese economy as an important avenue for investment, while the Chinese government aims to make Beijing and Shanghai into global financial centres that can compete with New York, London, Tokyo and Hongkong by offering incentives, including tax breaks and assistance with navigating regulations, to attract private equity firms to establish funds in their regions. The Chinese state is even privatising the management of its sovereign funds, by allowing private equity to bid for management status.
     Could the massive market that is China be the avenue for finance capital and its required speculative activities achieving the required growth for the system, while plastering over its deeper crisis? Time will tell.
[NL]

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