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Private equity titan eyes China for a rival to Rhodes Scholarship

A $200 million donation by Blackstone founder Stephen Schwarzman, to fund an international scholarship program has drawn comparisons with the Rhodes Scholar program. Flickr\ World Economic Forum

American private equity titan Stephen Schwarzman clearly has at least one eye now clearly fixed on the history books.

With great fanfare, Schwarzman announced this week he was creating a new scholarship program at Tsinghua University in Beijing, which would bear his name. Comparisons to the British colonial tycoon, Cecil John Rhodes, who established the Rhodes Scholars program in 1902 to bring scholars to Oxford University to study, were quickly and easily made.

When Rhodes established his program, Great Britain was the great power of its day. An endowment of $200 million permits approximately 200 international scholars to pursue two-year programs among the “dreamy spires” of Oxford. By contrast, the $300 million that will fund the foundation of the Schwarzman College at Tsinghua University will bring 200 students from leading countries around the world to study for one year in the world’s next rising power.

The goal of the program, which will launch in 2016, is to promote understanding between China and the rest of world. Central to this will be the program’s ability to influence and mold generations of future leaders. Importantly, Tsinghua is one of China’s top universities, which counts Xi Jinping, the current Chinese president, as an alumnus.

In addition to the philanthropic and other, more personal, reasons that drive such monumental gifts as this one, the Schwarzman endowment highlights how important China is to leading financiers in the coming decades. As the relationship between the United States and China grows ever more tense, in part due to the complex web of competitive and collaborative situations that the two large economies increasingly find themselves in, the potential for misunderstanding grows.

In addition to providing $100 million himself, Schwarzman secured another $100 million in donations from businesses and financial institutions who have prioritised China in recent years, such as Boeing, BP, Caterpillar, JPMorgan Chase, Bank of America and Credit Suisse. The balance of donations are still to be raised, although given the calibre of early sponsors, it doesn’t seem like this will be much of an issue. Schwarzman is clearly building for success. For example, the advisory board which will oversee the program is comprised of jaw-dropping list of world-renown former presidents, prime ministers and diplomats. And Kevin Rudd of Australia.

Notably, Blackstone, the private equity giant whose initial public offering earned Schwarzman over $4 billion, is not involved in the scholarship program. Schwarzman made clear that he was acting in a personal capacity in this regard.

As China’s economy continues to grow at a rate that far exceeds what the United States and Europe can generate, its importance in the world continues to rise each year. Ignoring China, or even just making decisions based on a view of the world that steadily grows more and more out-dated, is no longer an option.

The Schwarzman scholarship program recognises that education is an important and effective way to bring people together and broaden horizons. Experiences that challenge students in new environments can have a lasting impact on those individuals in the decades that follow. In their absence, students may find that their focus remains narrow and their goals unchanged.

Many critics of private equity and Wall Street will bemoan Schwarzman’s attempt at securing his historical legacy by donating a small fragment of the large windfall he earned from the IPO of Blackstone to support this eponymous educational endeavour. To them, the benefits purportedly provided by the global financial markets today, which have evolved so rapidly in recent decades, are nebulous at best.

However, Schwarzman’s own life hints tellingly at the power of a path not taken. Before he became one of the most successful practitioners of the “dark arts” of leveraged buy outs, he was a student at Yale University who dreamed of studying in England. Turned down first for a Rhodes Scholarship at Oxford and then later denied a fellowship at Cambridge, Schwarzman had little choice but to follow the well-trodden path to Wall Street.

Perhaps had he had the chance to enjoy cycling down Broad Street or punting on the river Cam, the history of modern finance might have been a little different. And perhaps the Schwarzman scholarship program will take more than one would-be hedge fund manager or investment banker or real estate impresario and, by showing them a different view of the world, lead them down another path entirely.

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