This raises the intriguing conclusion that Beijing has deliberately set SAFE and China Investment Corp, the official state investment fund, in competition to help boost investment returns.

Singapore's twin sovereign wealth funds - Government of Singapore Investment Corp and Temasek Holdings - are an obvious model for Beijing, which has in the past praised the city state's management of its foreign reserves.

'The government would like to emulate the success and structure of Singapore's competing funds,' said Fraser Howie, a Singapore-based expert on mainland finance.

Like Temasek, CIC has a mandate to invest in domestic companies as well as overseas. It used one-third of its US$200 billion fund to buy Central Huijin Investment, an investment arm of the central bank, while another third has been set aside for recapitalising big state lenders.

CIC is also planning to inject funds into China Petrochemical Corp, the parent company of Sinopec Corp, to help it acquire foreign assets, according to mainland press reports.

However, if CIC follows Temasek's lead, it will increasingly focus on investments overseas.

Beijing is expected to hand a further US$425 billion to CIC over the next three years, of which more than US$300 billion will be ploughed into foreign securities, according to a report released this week by fund industry consultancy Z-Ben Advisors.

This will dismay managers at SAFE, who for years enjoyed a monopoly on state investments in foreign securities and regard CIC as a rival.

SAFE, which is controlled by the central bank, traditionally invested in low-risk government bonds. The switch to aggressive equity investments bears the hallmarks of a turf war with CIC, which owes its allegiance to the Ministry of Finance.

'The central bank wanted to keep Huijin separate from CIC and lost the battle. Now they're going out and playing ball on their own,' said Arthur Kroeber, a director of Beijing-based consultancy Dragonomics.

'The [central bank] doesn't particularly want to manage a growing foreign portfolio, but if China's foreign portfolio is going to grow, it would rather have SAFE manage the funds than outsource management to CIC,' said Brad Setser, an expert on sovereign wealth funds at the US-based Council on Foreign Relations, in a research paper.

SAFE's recent investments in oil majors BP and Total, together with shareholdings accrued in at least three Australian banks, are aimed at increasing returns on the country's vast foreign reserves and diversifying away from US dollar assets, which are falling in value. In comparison, CIC appears to have multiple mandates that remain difficult to unpick.

CIC originally intended to amass a large portfolio of stakes in foreign firms, but political concerns have forced it to focus on smaller investments, Z-Ben's Peter Alexander said.

The sharp drop in value of CIC's US$3 billion investment in United States buyout firm Blackstone has created rancour at home, while CIC does not wish to stoke growing international hostility to the power of sovereign wealth funds. CIC's explicit role in supporting the expansion of state firms makes it hard for critics to believe it is wholly commercial.

However, a source close to CIC said the fund was not politically motivated. 'The bottom line is they are a professional organisation and they are managers. We can expect several billion-dollar-plus deals a year, but they want to stay away from political state initiatives.'