China builds up £9bn stake in top British companies

China's central bank has built stakes worth up to an estimated £9bn in Britain's index of leading blue-chip companies, including Tesco and Unilever.

A Sunday Telegraph investigation revealed yesterday that the People's Bank of China, and its investment arm - the State Administration of Foreign Exchange (SAFE) - has bought stakes in at least half the FTSE 100, and probably considerably more.

An investigation carried out by the newspaper showed that the People's Bank of China owns shares in many of Britain's household corporate names, such as Aviva, Cadbury, HSBC, the London Stock Exchange, Marks & Spencer and British Energy.

People's Bank of China stakes that have previously been revealed include BG Group, Drax Group and Prudential.

(Telegraph.co.uk)

The figures on SAFE's investments have been compiled from an analysis of the shareholder registers of about half of the companies in the FTSE 100. They reveal that almost all of them include the Chinese central bank as a shareholder.

Based on figures obtained from registers where the People's Bank of China could be identified, SAFE has spent more than £3.5bn on shares in British companies.

The total, though, is likely to be substantially higher because the Chinese central bank is an investor in some companies that have not discovered that SAFE is a shareholder.

More on banking

SAFE, which is in charge of managing large chunks of the country's $1.7 trillion (£900bn) of foreign exchange holdings, has previously invested most of its funds in low-yielding securities, such as Treasury bonds and mortgaged-backed securities, but the falling US dollar has put pressure on it to diversify.

However, questions have been raised about SAFE's investment strategy because most of the stake purchases in British shares have taken place during the past year, and many of them have been in the past three months, when the FTSE 100 index has continued to slide.

On Friday, the blue-chip index closed at 5240.7, marking a 7pc weekly fall amid continuing concerns about the outlook for the British and global economies.

The FTSE 100 opened on January 2 at 6456.9 and has fallen by about 18pc so far this year.