The Blackstone Group LP (BX) The Ten Surprises of 2015 Conference Call Transcript

If you look at Page 65, you could see that in 1999, it really reversed the economy from a consumer economy with the consumer at 45% in investment spending on state or enterprises in infrastructure 35%. By 2010, the consumer was 35 and state-owned enterprise and infrastructure spending was 45. Now they want to reverse that. There is evidence that they are doing that through the service economy. They have many more service workers. But service workers make less money than manufacturing workers so it does not have the same impact on income. Nevertheless, it does put people to work and takes them out of the country and that is a favorable trend. So China is on a favorable path to rebalance itself but it isn’t moving fast enough in my opinion. And that is one of the reasons why I think it will slow to all of the stated rate of 7%.

Turning to the final topic, Japan, Japan was in a pretty good growth phase but then set back in the recession in the third quarter and now I think Shinzo Abe will engage in more fiscal and monetary spending in order to bring Japan back on to a growth path. The reason I like Japan and have a 5% position there is that there are a number of companies that are attractively priced. The price earnings ratio for the whole market is attractive but their number of individual issues are very favorably priced.

In terms of the Yen, I think it can appreciate a little bit further but probably not a whole lot further and I think much of the Japanese government debt recalled 50:15 internally if it can continue to expand now. So I think the Japanese market can make some progress but what with the depreciation in the currency, I think it will probably be flat for the year.

Okay those are all the comments I wanted to make to you formally today and now, I’d like to turn it back to Joan Solotar for the question and answer period.

Question & Answer Session:

Joan Solotar

Great Byron. We have quite a few questions coming in and as you can imagine, there is really not a meeting you can have with an investor where energy doesn’t come up so we have a few on that. I will start with the energy topic. First, can you reconcile lower energy prices with the view of a China slowdown. Aren’t they one of the great beneficiaries of the drop in oil?

Byron Wien

China and India are great beneficiaries. As I showed you in that chart, China is using less than 3 barrels of oil per person per year, India less than 1. Oil is not the dominant factor in the Chinese economy. Food and housing are the dominant factor and food and housing are not coming down in price the way energy is. So, I view it as a positive but I don’t view it as something that is a profound boost for the economy, and just because China and India are such low consumers per capita, but I don’t think it is going to have a more dramatic impact on overall economic growth.