Contrary to skepticism about the Korean economy with institutions at home and abroad slashing growth estimates for Asia’s fourth largest economy amid widening trade war between the U.S. and China, the world’s biggest private equity fund Blackstone believes Korea could benefit from a fallout between the two largest economies, according to its president.

The faceoff between the U.S. and China has been building up consensus for a “rebalancing” in excessive Chinese reliance and responsibility in manufacturing and supplying products across the globe, Blackstone President Jon Gray told Maeil Business Newspaper on Wednesday.

The process of realignment in the value chain will likely benefit Asian countries with competitiveness in labor cost or technologies, he said in the first interview with a media organization in Asia since he moved up to No. 2 position in the New York-based PEF major.

Gray is in Seoul to meet with institutional investors and Korean companies.

“We’re seeing movement to Vietnam, Bangladesh, the Philippines, and I think some movements to Korea as well....I think it’s fluid but I think likely beneficiaries will be countries in Asia.”

“Korea is well-positioned to serve Asia overall, and we think Korean economic strength will continue to be good over time,” he added.

There clearly are some headwinds today, “most notably as a result of trade frictions,” but on the other hand the decline in commodity prices and the decline in global interest rates will be helpful to offset some of the slowdown in the global economy, Gray said.

“It feels like we won’t see a resolution in the near term, but we do have some optimism over time for two reasons.”

He said one is in both parties interested in getting this resolved - both U.S. and Chinese economies will suffer in the context of escalating trade dispute. And the second reason is “there’s a recognition that a rebalancing is occurring as China grows to be today’s second largest economy in the world and the relationships and reciprocal openness of those markets need to shift.”

He also considered the investors’ heavy bet on lower interest rates and the rise of political populism as current investment risks in markets across the globe. “Everybody, of course, believes interest rates are going to zero… but what actually occurs are different.”

Political populism also is not supportive or less supportive trade, immigration, the free flow of capital, and policies can be “adverse to economic growth,” he emphasized.

“The important thing is to really take a longer-term perspective and to think about investing in industries and geographies where you have long-term confidence and in our world where we have operating expertise as well…In the long term, I think Korea has a bright future, so this may create an opportunity for firms like us to deploy more capital to here,” Gray added.

Gray hinted Blackstone’s investment strategies in Asia.

“In Asia, we have a very favorable outlook. Because underlying growth in Asia is so much stronger than it is in the rest of the world… In emerging Asia, what we really want to invest in is the rise of the middle class. As their incomes go up, they want to consume some certain things, so we’ve invested in retail, as an example in Korea,” Gray said, “overall, we’re quite positive on the economic fundamentals in Asia, and as a firm we’re pushing to more, more businesses in Asia.”

Korea is a country that is well-positioned for a long-term future growth with the strength of the corporate sector, technology and trade, and all of the positions make Korea positive for the long term, Gray added.

By Han Woo-ram and Lee Ha-yeon

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