Chinese group builds BP stake

Chinese group builds BP stake

By Richard McGregor in Beijing and Rebecca Bream in London

Published: April 15 2008 19:58 | Last updated: April 15 2008 19:58

BP has confirmed that a Chinese state-owned company has built up a stake of about 1 per cent in the oil and gas group but said it did not yet know which group had made the investment.

“We are aware that over the past few months a Chinese entity has built up a stake of just under 1 per cent,” the UK-based company said.

BP had not yet received notification of which Chinese entity owned the shares.

BP added that it welcomed the investment. “Our shares are traded publicly and we welcome all shareholders.”

The UK government also said the investment was good news. Alistair Darling, chancellor of the exchequer, said in Beijing that the UK welcomed investment “be it from the private sector or sovereign wealth funds, provided it is done on a commercial basis”.

“We don’t set arbitrary limits [on stakes] – that is a decision of the investor.”

He declined to comment on the specifics of the BP case, and said the identity of the Chinese sovereign fund was a matter “for the company concerned”.

The State Administration of Foreign Exchange (Safe), an agency under the central bank, has long been in charge of managing China’s foreign exchange reserves, which stood at $1,682bn at the end of last month. Safe has traditionally invested in low-risk securities such as government bonds.

China Investment Corporation, the country’s new sovereign wealth fund, has control of a separate reserves fund, of $200bn, but only about $70bn of that is available for active investment.

CIC was founded in September with an explicit mandate to manage the reserves more aggressively in search of higher returns.

CIC’s founding appears to have also spurred a partial change in the investment philosophy of Safe, which has bought large tranches of shares in Australian banks and resource companies, and Total, the French oil company, in recent months.

If China ends up having two sovereign funds, it would be following the example set by the Singapore government, which oversees both Temasek and the Government Investment Corp.

In Beijing, Mr Darling met top finance ministers in the Chinese government, led by Wang Qishan, the vice-premier. The chancellor also met the head of CIC, Lou Jiwei.

Mr Darling has supported the CIC opening an office in London, which would be its first overseas.

Safe declined to comment.