China’s investment in Blackstone is not about a sudden policy of efficient investing by the Chinese government. The investment is about connections, political influence, or as the Chinese would say, ‘guangxi’. For basically .3% of their reserves, chump change, the Chinese have bought a warm reception in the US. There should not be excessive excitement about a reform of Chinese policy. China’s policy does not reform. It is remarkably consistent.

China is a relationship based system. The government’s action are not based the need to comply with laws protecting the beneficiaries of its assets. Like Temasek in Singapore, it is a government run program. Governments invest for political reasons, not necessarily for profit. China will use its reserves like Russia uses its gas; to reward friends and punish enemies.

The problem with China’s assets is that they are offset by liabilities in their banking system. With a burst of their stock market bubble, those liabilities are about to get much worse. Western investment bank should not count on China’s reserve cookie jar, because it might actually be empty.