SAFE seen behind purchase of GBP1b stake in British oil giant BP

In an apparent move to boost returns on China's huge foreign currency reserves, a mainland entity believed to be the investment arm of the State Administration of Foreign Exchange (SAFE) has accumulated a stake worth almost GBP1 billion (HK$15.34 billion) in British oil giant BP.

Made less than two weeks after it emerged that SAFE had built up a 1.6 per cent stake of about Euro1.8 billion (HK$22.22 billion) in French oil group Total, the latest purchase is likely to revive international criticism about the opacity of the mainland's investments in foreign companies.

'We are aware that a Chinese entity owns just under 1 per cent of BP, built up over some months, but we cannot confirm what that entity is,' BP spokesman David Nicholas said yesterday.

A source close to BP said the transactions had been made by a mainland state bank for an unnamed client that was almost certainly SAFE's investment arm. 'All the indications are that the client is the same entity that bought shares in Total,' he said.

BP is Britain's largest firm with a capitalisation of GBP104 billion, valuating SAFE's stake at almost GBP1 billion.

Britain remained open to investments by Chinese state funds, British Finance Minister Alistair Darling said during a visit to Beijing yesterday. 'Our belief in open markets and free trade is reflected in the UK's openness to inward investment, including from sovereign wealth funds,' he said. 'And we welcome the creation of the Chinese sovereign wealth fund and its potential for investing in our country.'