Carlyle CEO discusses ‘change in tonality’ of US-China relations under Biden

During a January presentation to CalSTRS, Lee trumpeted the 'sheer scale and the potential' of China's booming economy for investors.

Kewsong Lee, chief executive officer of The Carlyle Group, last month told a California State Teachers’ Retirement System committee he hoped for a “change in tonality” in the relationship between the US and China under president Joe Biden.

“I do believe there’s going to be constructive engagement, and perhaps more of a multi-lateral approach where Europe and other allies are engaged in a discussion,” Lee said on January 27. “I think it’s important that the relationship is not one of adversaries, but one of great competition.”

Lee was asked about the future of the relationship just as president Biden began his term in office following the acrimony between the two superpowers that marked former president Donald Trump’s time in office.

While stressing that nobody knows how the relationship will play out, Lee said both Democrats and Republicans have an “underlying view” that the US needs to be tough on China, but lack certainty about how to do that following China’s rise as a global economic power.

“China is as a nation very focused on what they’re trying to do, and they’re going to do what’s in the best interests of China,” Lee said. “America and the other nations around the world are trying to get a handle on what’s the right way to constructively engage moving forward with respect to this paradigm, which is very different than what it was over the past two or three decades.”

Much of Lee’s presentation, given in conjunction with Carlyle managing directors Jason Thomas, the firm’s head of global research, and XD Yang, chairman of Carlyle Asia, focused on China’s status as the world’s largest economy as well as home to a burgeoning consumer economy.

In general, Lee stressed that China and the US will each pursue their own interests, which will not necessarily be the same.

“You’re still going to see a relationship which is tough and where you’re going to continually see what I call a bit of strategic drift,” he said, while adding that “from a global growth perspective and from mutual self-interest perspective there is going to be a need to engage.”

“We need to move from a perspective of trying to hold back and make us lose less slowly to one of focusing more on what we’re going to be strong at, how we’re going to compete better,” he said.

Lee and his colleagues stressed that most pools of capital were under-allocated to China, and that there were countless investment opportunities waiting to be unlocked.

“The scope and the sheer scale and the potential of China is just enormous,” he said.

Action Item: watch Kewsong Lee’s entire January 27 presentation to the CalSTRS investment committee here.