China starts to build a BG stake

China has bought a 0.46% stake in UK gas producer BG Group, raising the prospect of the country increasing its shareholding further, according to published reports.

Fred Lucas, an analyst at London brokers Cazenove Group, said an analysis of BG's share registration data showed the People's Bank of China (PBOC) had bought 15.5 million shares in the company between 15 June and 13 July, Bloomberg News reported.

Bloomberg cited a BG spokeswoman as confirming that the Chinese central bank was a shareholder but declined to specify its stake.

A PBOC official in Beijing declined to comment but said the central bank does not have any direct investment business, Reuters reported.

Eurasia Group, a New York intelligence advisory company, said the PBOC made the purchase on behalf of China's fledgling state investment corporation.

Eurasia said the stake in BG Group was consistent with the sovereign wealth fund's increasingly aggressive outbound strategy.

The investment company, being set up to manage $200 billion of China's $1.33 trillion in foreign exchange reserves, is likely to be called China Investment Corporation (CIC).

"The CIC will almost certainly increase its very small initial investment in BG Group, raising the prospect of a potential future takeover bid," Eurasia Group said in a note.

Bloomberg cited Cazenove as agreeing: "Given the scale of US dollar reserves that it is understood to be trying to redeploy for higher returns, there ought to be potential for it to buy a much larger stake."