Snow Says China Needs to Open Markets to Create Jobs

Cerberus Capital Management LP Chairman and former U.S. Treasury Secretary John Snow said China needs to open the country's market for overseas investors to create the 25 million new jobs a year the nation needs.

New York-based Cerberus is opening a Hong Kong office to expand into China, the world's fastest-growing major economy, Snow said. China's leadership was very focused on improving the efficiency of the nation's companies, which is where the expertise of firms such as Cerberus could help, Snow said.

``When you need to create 25 million new jobs every year, you have a heavy undertaking,'' he said in an interview in Hong Kong today. ``As treasury secretary, you wake up every morning thinking about jobs.''

Cerberus and rivals such as Blackstone Group LP are bulking up in China, even after the nation last year tightened rules on buyouts. Blackstone, seeking its first buyout in China, last month hired former Hong Kong Financial Secretary Antony Leung to lead its foray into the nation.

``The best opportunities are obviously in places where you have sustainable growth, like China, like India,'' Snow said. ``But private equity will also go to places where it's welcomed. It will go to places where the rules are clear, and the laws are enforced, where there's a good judicial system, where there's a process for arbitrating disputes and so on.''

Takeover Rules

Takeover rules announced in September are crimping overseas buyout funds after Chinese lawmakers criticized the government for selling state assets too cheaply. Only half of the $67 billion of announced acquisitions of Chinese assets by overseas buyers were completed last year, data compiled by Bloomberg show.

Asia's faster economic growth and large, untapped markets have lured more investors to private equity funds focused on the region. Last year, buyout firms raised a third more money for new funds, or $32 billion, mainly for Australia, China, India and South Korea.

``Investors are increasingly looking at the Asia Pacific region after seeing competition for deals intensify in the U.S. and Europe,'' said Hiromichi Mizuno, a partner at Coller Capital Ltd., a London-based investment company that manages $3.5 billion of assets. ``They want to tap rapid growth in China and India, as well as Japan's economic recovery.''

The value of announced private-equity and management buyouts in Asia more than tripled last year to $50 billion, according to data compiled by Bloomberg. The economies of China and India, the world's two most-populous nations, grew 10.4 percent and 9.2 percent respectively in the latest quarter.

Japan Recovery

Japan's current account surplus unexpectedly narrowed, according to a release today, as record profits allowed the nation's companies to increase dividends for overseas investors. Japanese companies are earning record profits amid the economy's longest postwar expansion.

The traditional private equity model of outright takeovers or buying of majority stakes may have to be modified to reflect local regulations and cultures in Asia, Snow said.

``I think one of the characteristics and strengths of Cerberus is the versatility and the realization that countries around the world and peoples around the world approach things somewhat differently,'' he said. ``You have to show respect for the traditions and culture for the countries you invest in.''

Separately, Snow said the U.S. can't force China's government to allow faster gains in the yuan and that dialogue is the best way to achieve appreciation.

``It's in China's own interest to continue to allow the yuan to expand in terms of flexibility,'' Snow said. ``I don't think we can force China to do anything.''

Snow's comments came after the Group of Seven nations over the weekend urged China to allow the yuan to move more on a trade-weighted basis to narrow global imbalances. People's Bank of China Governor Zhou Xiaochuan said on Feb. 9 that the current pace of appreciation is ``appropriate.''

source:www.bloomberg.com