China to take $3 bln stake in Blackstone

(Recasts paragraph 6)

By Ransdell Pierson and Tamora Vidaillet

NEW YORK/BEIJING, May 21 (Reuters) - China's new state investment agency is taking a $3 billion stake in U.S. private equity firm The Blackstone Group, in a sign Beijing plans to use its stash of currency reserves to become a global investor.

The agreement gives China's government a stake in the private equity boom sweeping the world and seals a key alliance for Blackstone [BG.UL] at a time when foreign investors are struggling to gain support from Beijing to buy domestic assets.

China is taking a non-voting stake of just under 10 percent in Blackstone, leaving it under the radar screen from U.S. government scrutiny and providing a template for future deals.

"From what I understand it should be, or will be, part of a trend," Blackstone co-founder Stephen Schwarzman said of China's investment. "Blackstone is the first, but over time I would suspect there would be others," he told Reuters by phone. The announcement comes just days before Chinese Vice Premier Wu Yi meets U.S. Treasury Secretary Henry Paulson in Washington to discuss sticking points in trade in the second round of the two governments' "Strategic Economic Dialogue".

The run-up to the talks has seen a flurry of deals and government measures, including Friday's move to widen the yuan's trading band, which analysts say could allow the currency to appreciate faster.

"If we are going to borrow from them, then we have to let them buy things," said William Overholt, director of the RAND Corp's Center for Asia Pacific Policy.