- Amid heightening trade tensions between the US and China, China’s sovereign wealth fund has finished selling its entire 9% stake in the US investment firm Blackstone.
- That firm is helmed by President Donald Trump’s friend and informal adviser Steve Schwarzman.
- That this is the way China chose to hit the Trump administration – very personally – says terrible things about what US policy has become.
China has dropped one of President Donald Trump’s closest friends at a rather delicate moment.
In a recent government filing, Blackstone, the investment firm founded by the billionaire Steve Schwarzman, revealed that China’s sovereign wealth fund had sold all of its nearly 10% stake in the firm.
There is talk from Chinese officials that this sale was a long time coming, and that it was done gradually over time. Others also argue that this is just part of a bigger push on China’s part to invest more domestically.
Those explanations, however, are hard to swallow if you’ve been paying attention. It’s no secret that, just as the Chinese were offloading their strategic investment in one of the world’s largest dealmakers – a stake, incidentally, that was touted as giving Blackstone a huge leg up in the Chinese market – the US was making moves of its own.
On Monday, the Trump administration rejected the Singapore-based chipmaker Broadcom’s attempt to acquire the California-based Qualcomm. The White House statement on that matter cited national security concerns. It fears Broadcom will strip Qualcomm, making it unable to compete with China’s aggressive 5G agenda.
Hours later, Politico reported that Trump was seriously considering putting aggressive tariffs on China after a lengthy investigation into the country’s theft of US intellectual property. That investigation was announced in August – so both the Trump and Xi administrations have had a long time to think about it (and plan accordingly).
In fact, China has made no secret of the fact that it had ways of retaliating against the United States in the event of aggressive economic action since Trump’s transition to the White House.
That China chose to take action against Blackstone during all this tells us something about how China may choose to respond to Trump’s tariffs and other steps: by making this personal.
Trump has said trade wars are “easy to win.”
But if Blackstone is indeed a response to Trump’s trade actions, it means the Chinese have decided that the best way to make Trump feel consequences for his actions is to turn on his buddies from New York.
That kind of move – making oligarchs suffer to send a message to their leader – tends to work best in Banana Republics. It’s petty, it’s sad, and it’s today’s state of affairs.
Xi loves me, Xi loves me not
It’s not that Schwarzman hasn’t been doing his best to make nice with Beijing.
In 2013 he spent $US100 million on “Schwarzman’s Scholars” – a program that brought 110 students from around the world to China to learn about international relations and warn them against a cold war with China.
“With populism, no matter who you attack, your own circumstance doesn’t really change, so you keep looking for new targets,” Schwarzman told CNBC. “My instinct was at some point different countries in the world were going to find China.”
Last year, he hosted the CEO of HNA, the embattled Chinese mega-dealmaker, at a lavish dinner that featured masks in the shape of the CEO’s head at every place setting, according to Bloomberg. HNA, like all large Chinese companies, is virtually inseperable from the state.
With that mindset and his close relationship with Trump it’s no wonder Beijing maintained its close relations with Schwarzman. Perhaps it still will, but it certainly won’t find him as useful.
And things keep happening to people Beijing no longer finds useful.
Take, for example, the billionaire casino mogul Steve Wynn, who once delivered a message to Trump from the Chinese government, imploring Trump to extradite a Chinese dissident living in New York City. Attorney General Jeff Sessions almost quit over the whole affair, and Wynn failed.
Shortly after that, when Wynn was accused of some truly disturbing acts of sexual violence against his employees, the gaming regulator in Macau – home to Wynn’s most profitable casinos – suddenly became concerned.
According to Bloomberg, it has met with members of his Macau management team on the accusations and expressed concern on the matter.
This isn’t happening because Macau – a haven for sex trafficking and prostitution – is having a #MeToo moment.
More likely it’s that next year Wynn, and his fellow casino oligarchs, will have to renegotiate their licenses to operate in Macau. Expect those negotiations to be harder for moguls than ever before.
None of this is over, either. Trump’s next move on China will be over state-sanctioned intellectual property theft, which – to be fair – is a real problem. If you don’t believe me, then I have a Dairy Queen to take you to in Beijing (you won’t even notice the difference from the real one). US Trade Representative Robert Lighthizer, a Reagan administration veteran, recently presented Trump with a package of tariffs that would smack China to the tune of $US30 billion a year in Chinese imports. According to Politico, Trump said that wasn’t enough. The tariffs could be out as early as next week.
In reality, though, this has been over six months in the making. China has had plenty of time to plan its response. And, during that time, Beijing has surely worked out that there are only so many ways to get to Trump. His staff is fleeing or fleeting. The State Department is a mess. There’s no ambassador to South Korea, for Pete’s sake. If you’re China and you want to send a message, you’ probably do it the way you’re used to – through family, through friends, the oligarchy way. This isn’t government by the people; it’s government for one person.
The Chinese know that, and that fact alone should make the hair on the back of your neck stand on end.