By Matthew Miller

BEIJING (Reuters) - When Blackstone Group Co-founder and Chief Executive Stephen Schwarzman was asked by the president of China's elite Tsinghua University to design a major initiative for the school, the private equity billionaire decided to aim high.

His target, Schwarzman told Reuters, was "the future relationship between China, which is rising in power very rapidly, and the rest of the world."

Schwarzman hit upon the idea of creating a one-year Master's degree program, the Schwarzman Scholars, to bring together 200 "future leaders" from China and the world in a hothouse environment of academics, cultural immersion and dialogue.

Schwarzman, in Beijing this week to launch the program at the newly built Schwarzman College at Tsinghua University, will be flanked at an inaugural ceremony on Saturday by U.S. Ambassador to China Max Baucus, former Prime Minister of Australia Kevin Rudd and Chinese government officials.

This year’s inaugural class includes 110 students from over 30 countries, with more than 40 percent from the United States and 20 percent from China.

For Schwarzman, whose close ties to China date back a decade when China Investment Corp [CIC.UL] forked out $3 billion for a stake in his company, defusing misunderstandings between the world's second-biggest economy and the West is crucial, especially at a time when a populist backlash threatens to derail cross-border economic and trade relations.

Schwarzman kicked in the first $100 million and later raised the program's endowment to $435 million, with contributions from more than 70 global companies and industrialists including BP PLC, Delta Air Lines Inc, EMC Corp and Bank of America Merrill Lynch.

"The pitch is really global stability and access to China, not particularly for the people who give money but for the system," said Schwarzman.

Former U.S. Secretary of State Henry Kissinger, former British Prime Minister Tony Blair, former President of France Nicolas Sarkozy, and former World Bank President James Wolfensohn lead an A-list group of high-powered advisers to help oversee the program, modeled on the Rhodes Scholarship.

Blackstone, which looked after $356 billion assets as of end-June, counts Chinese institutions and individuals as an important and growing source of revenue.

"In terms of overall touch, we're by far the largest manager of alternative assets for Chinese institutions investing around the world," Schwarzman said.

But the scholarship program "has nothing to do with the business," he said. "If I wanted to help my business, I wouldn’t spend as much time as I was doing Schwarzman scholars and I would have kept my own money."