By staff reporter Li Qing

China Investment Corporation (CIC) will raise its stake in the private equity firm Blackstone Group to 12.5 percent. Blackstone has filed a document with the U.S. securities authority SEC, and CIC has acknowledged this initiative to Caijing.

CIC, China’s sovereign wealth fund, spent US$ 3 billion to buy 9.99 percent stake in Blackstone in 2007. Since the purchase, the equity has lost two thirds of its original book value. Today, a share of Blackstone is priced at roughly US$ 9 on the New York Stock Exchange, in contrast with US$ 29.61 per share when CIC first bought in.

Beijing Wonderful Investment Ltd. serves as an offshore, special purpose vehicle for this investment. Under the current arrangement, CIC would buy common stock to increase its stake to 12.5 percent, as agreed on by all three parties.

Despite the recent credit crunch and subsequent freezing of leveraged buyouts for private equity firms, Blackstone has recently made its first investment in China, purchasing 20 percent of the retail company China Bluestar. Two senior executives of Blackstone will sit on the board of Bluestar.