The People's Bank of China has acquired a 0.7 per cent stake in the group, which runs Britain's biggest coal-fired power station.

It is understood to have acquired the stake slowly over the past year, and is part of a pattern of the bank investing small portions of the nation's £1.01 trillion ($1.81 trillion) in foreign exchange reserves in FTSE 100 companies.

A Drax spokesman confirmed the stake and said: "We welcome all long-term shareholders."

The stake is estimated to be worth about £18m.

The stake had been acquired quietly as it falls below the three per cent disclosure threshold which London Stock Exchange-listed companies must adhere to.

However, the bank's stake barely impacts on Drax's shareholders' register, which counts Invesco, Barclays and Morgan Stanley among its major shareholders. Drax is believed to view the Chinese shareholding as a long-term investment rather than the start of an acquisitive stake-building exercise.

Drax, which can supply up to seven per cent of the UK's electricity needs and is its biggest single source of carbon dioxide, recently reported a slump in earnings as it was hit by higher coal and carbon emissions costs.

It said last month earnings before interest, tax, depreciation and amortisation (EBITDA) were £206m for the first six months of the year, compared to £288m a year ago.

The People's Bank of China is reported to have already acquired small shareholdings in UK insurers Legal & General, Old Mutual and Prudential.

The stake in Prudential is believed to be around one per cent, worth about £132m, making the Chinese bank among the firm's top 25 institutional investors. In total the People's Bank of China is believed to have acquired shareholdings worth more than £200m in FTSE 100 companies.

The bank has already acquired high-profile stakes in investment bank Morgan Stanley and private equity firm Blackstone Group. The bank's press office declined to comment.

China's state-controlled Sinopec recently withdrew from a takeover battle for Leeds-registered Imperial Energy Corporation, leaving India's Oil and Natural Gas Company free to proceed with a £1.4bn takeover.