CROSBY Asset Management's China fund, London-listed China Investment, has made its first major investment, a US$3.4 million, 34 per cent stake in unlisted Ningbo Three Circle Power Machinery. Ningbo Three Circle is a joint vehicle set up to operate a diesel engine manufacturing business which has been acquired from the Cixi Engine Works in exchange for a 66 per cent stake in the joint venture. Under the joint-venture agreement, the fund will appoint a director to the Ningbo Three Circle board of directors. The engine works, currently running at a profit, will use the funds injected to expand capacity and develop new models of its small air-and water-cooled diesel engines. Dividends will be paid to China Investment in foreign currency. The fund has about $27 million to invest but until yesterday had invested only about 2.5 per cent of its assets in China stocks, with the bulk held in cash and short-term instruments. Its investment in the Ningbo company represents about 13 per cent of the fund's net assets. Crosby group executive Nicholas Smith said Ningbo had good export revenue and would offer the fund ''quite significant dividend returns''. The fund was set up last year but Mr Smith said it was in no hurry to pick its investments: ''A lot of companies have approached us and we are looking at several but we have extensive due diligence procedures and it takes time. ''You have to be very careful.'' The Crosby fund aims to take minority investments in small Chinese enterprises seeking capital and to help them list on mainland stock markets.