China boosts stake in UK with London shares spree

Richard Evans
Fri, September 10, 2021

People's Bank of China

China’s central bank has muscled in on the London stock market to grab a bigger stake in Britain even as economic tensions between Beijing and the West rise.

The People’s Bank of China now owns UK shares worth $17.1bn, including stakes in most of the FTSE 100, analysis by The Sunday Telegraph has revealed. It has dramatically increased its exposure in the past few weeks: the total value of its holdings in the second quarter of the year was less than $2bn.

The Bank owns more than 1.5pc of BP and Royal Dutch Shell, where it is the fourth-largest holder of the “A” class of shares. It also owns more than 1pc of Vodafone, BHP and Anglo American, according to data from Bloomberg.

In all it has stakes in more than 100 British companies, with particular exposure to energy stocks, which account for about a quarter of its London holdings. The materials sector accounts for a further 16pc.

However, its buying spree has come at a time of mounting tension over China’s behaviour in Hong Kong and towards Taiwan, and the treatment of its Muslim minority. The UK has joined allies to restrict the use of Chinese telecoms equipment and ministers are currently grappling with how Chinese investment in new nuclear power stations might be replaced.

The People’s Bank’s stocks are believed to form part of China’s foreign currency reserves, which it has diversified away from the dollar and from bonds. It also owns shares in a handful of other countries, including Italy and Malaysia. No American stocks were found among the Bloomberg data.

Most of the companies identified as holdings of the People’s Bank and contacted by this newspaper declined to comment beyond confirming its presence on their shareholder register. However, Rolls-Royce said: “China is an important market for our civil aerospace and power systems businesses and so it is gratifying that China’s central bank sees our shares as a good investment.”

Experts said it was uncommon for central banks to own shares. The Bank of England owns bonds as part of its QE programme but does not own any stocks.

The People’s Bank of China did not respond to requests for comment.