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Does sinking Blackstone spell decline of private equity's dynasty?

As I posted in June, Blackstone Group's CEO Stephen Schwarzman gave an interview to the Wall Street Journal with a compelling theme -- Schwarzman is the Napoleon of private equity. Napoleon-watch tracks his moves on the business battleground.

The New York Times [registration required] reports that China is not happy its investment in Blackstone (NYSE: BX). Since Blackstone's June 22 IPO, China's $3 billion stake has lost $425 million worth of its value, or 14%.

We may look back on China's investment in Blackstone as a watershed event. Back in the 1980s many Americans were up in arms about the 1989 purchase of Rockefeller Center by a Japanese company -- Mitsubishi Estates Co. That money-losing investment marked the turning point in a decades-long decline in Japan's global ascendancy. While China's Blackstone investment did not cause much uproar here, it may have marked the private equity peak just as the Mitsubishi investment marked a peak in both Japan and New York real estate.

Meanwhile, Chinese bloggers are angry about China's money-losing Blackstone investment. Here's a particularly scathing post: "O senior officials of the Chinese government, please do not be fooled by sweet-talking wolves dressed in human skin," according to one of seven scathing postings compiled by an anonymous blogger on Sina.com, a Chinese Web site. "The foreign reserves are the product of the sweat and blood of the people of China, please invest them with more care!"

Of course, the Chinese government wiped out that post between Thursday afternoon, when it first appeared, and Thursday evening.

More worries for free speech advocates. When News Corp. (NYSE: NWS) takes over the Wall Street Journal, such anti-Chinese government speech won't even get an afternoon's public airing. Until then, it's a safe bet that China will lose even more money at the hands of Blackstone's busted IPO.

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Blackstone or News Corp.

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