Carlyle Group Cofounder Outlines Firm's Vision for China

The Carlyle Group says China holds the key to the world economy's future. That may explain why Carlyle co-founder David Rubenstein spent part of Thursday morning hosting five students from Beijing's Tsinghua University's School of Economics and Management at the District-based private equity giant's headquarters.

The five students had won a Carlyle-sponsored essay contest on the emerging private equity industry in China. Each received a cash award and all-expense paid trip to Washington and New York for sessions with Carlyle officials, a tour of the New York Stock Exchange and a meeting with an executive from the Nielsen Company, one of the 201 businesses in Carlyle's portfolio.

After sharing some history about the White House and the geography of the nation's capital, Rubenstein offered some insights into Carlyle's long-term plans in China.

"I expect our presence in China will increase dramatically over the next couple of years," Rubenstein said. "There is nothing more important to Carlyle than China."

With its 1.2 billion people and ultra-fast economic growth over the past decade, he said "the growth and opportunities in China are unmatched anywhere else in the world."

-- Thomas Heath

Carlyle is competing with other big private equity firms such as The Blackstone Group, for a slice of the Chinese market. Blackstone, which went public earlier this year, sold a piece of its firm to the Chinese government, potentially giving it an inside track on future deals there. Although Blackstone's stock is down from its initial sale price, Rubenstein predicted that the stock would eventually do well and that "China will get a good return on its investment" in the New York-based private equity firm.

Rubenstein said Carlyle was an early investor in the Chinese marketplace. Its China office has hired many native-born Chinese, and the company is seeking to build its buyout and growth-capital businesses there.

Even if China's economic growth slows from 10 percent annually to around 7 percent, Rubenstein said he remains very bullish on the country. He thinks that in 20 years China will have the world's most powerful economy. Over the past 2,000 years, he said, China has had the dominant world economy for all but three centuries. Rubenstein expects China to regain its preeminence after a lag over the last 250 years.

"China is going to continue growing at a very significant pace," he said. "When the Chinese economy slows down a slight amount, it's still going to be the best place to invest."

Rubenstein said Carlyle already has many partnerships in Chinese companies, and he said its interest in China Pacific Life Insurance Company Ltd., "could turn out to be the single best investment we've made in the last 20 years."

During the visit, Rubenstein took questions from his guests about his firm, which now has about $75 billion under management. There were the usual queries about when Carlyle was going public ("We haven't decided whether or when Carlyle will go public.") and what has been the private equity firm's most profitable ventures (the U.S. Buyout Funds, by far).

Not all the talk was about business and economics, however.

One of the students bemoaned the fact that it was difficult to get a tour of the White House because you had to book reservations three months ahead of time.

After explaining the security concerns in the United States following the Sept. 11 terrorist attacks, Rubenstein turned the tables, saying "I expect it's not easy for any American to get into [Chinese President] Hu Jintao's place either."
-- Thomas Heath

By Mike Shepard  |  October 4, 2007; 4:33 PM ET  | Category:  Carlyle , Private Equity
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