China Invests in New TPG Fund : FT

The State Administration of Foreign Exchange, an arm of China's central bank, has agreed to invest more than $2.5 billion in the latest fund being set up by U.S. private equity firm TPG Capital, the Financial Times reported on Wednesday.

The paper, reporting from New York, cited people familiar with the matter. The investment would mark a new step in SAFE's strategy to diversify China's $1.75 trillion in foreign exchange reserves, which it manages and are invested mainly in dollar bonds and other fixed-income instruments.

SAFE, whose investments are a state secret, has also bought small stakes in a trio of Australian banks and oil majors BP and Total, according to those firms and media reports.

Buying into TPG, also known as Texas Pacific, would also underline China's growing interest in private equity.

China Investment Corp, a sovereign wealth fund set up last year to manage a separate pool of $200 billion in reserves, has ploughed $3.2 billion into a private equity fund set up by New York-based J.C. Flowers & Co that will target financial institutions.

CIC also bought a $3 billion equity stake in private equity house Blackstone  before its initial public offering last year.

The new TPG fund has not closed but has about $17 billion in assets, the FT reported. TPG last week agreed to buy a 23 percent stake in British mortgage lender Bradford & Bingley.

Chinese firms looking to build stake in BHP

Meanwhile, Chinese steel companies are looking to join forces to take a significant stake in miner BHP Billiton, the Sydney Morning Herald newspaper reported on Wednesday.

The paper quoted an official connected with the China Iron & Steel Association as saying that Baosteel and Wugang and Angang hoped to come together to invest in BHP, in a deal likely to be financed by the China Development Bank.

"Organising this is not easy," the official added.

China Development Bank funded a purchase in March by aluminium producer Chinalco of a 9 percent stake in Rio Tinto, subject of a $170 billion takeover bid from BHP.

Chinese steel companies are concerned that if a merger between Rio and BHP did go ahead it would further entrench the stranglehold the two have on the global iron ore market. Industry sources said on Tuesday that Chinese small steelmakers would accept a 95 percent price hike in annual iron ore prices by Rio Tinto, though the bigger firms are seen holding out for a better deal.

© 2008 CNBC.com