A Chinese sovereign wealth fund has quietly built up a £1bn stake in BP, Britain's largest company.

Shares in the oil giant jumped this morning following reports that the fund has built up a 1% stake. In early trading they were up 11p at 560p, a 2% gain.

A BP spokesman said the firm was "aware of the Chinese shareholding and we welcome all shareholders".

The identity of the fund has not been confirmed. Last month China's State Administration of Foreign Exchange (Safe) spent £1bn buying a stake in Total, the French oil firm.

The move has sparked speculation of a new wave of investment in western companies by Chinese funds, which are cash rich thanks to the country's buoyant exports.

Last year China Investment Corp, a $200bn (£101.4bn) sovereign wealth fund, spent more than £4bn on a shareholding in Blackstone, the US private equity company.

Other sovereign wealth funds have pumped money into investment banks in recent months, following the credit crunch. Singapore's GIC bought an $11bn stake in UBS last December – since when the Swiss bank has announced more write-downs and a rights issue.

The BP deal is reminiscent of the furore two decades ago when the world's oldest sovereign wealth fund, the Kuwaiti Investment Authority, snapped up over 20% of BP after its flotation was disrupted by the stock market crash of 1987. KIA was later forced to cut its stake, but is still a major investor.

Sovereign funds have grown in power in recent years, as rising energy prices have left many Middle East countries with piles of cash to invest. Many are less than fully-transparent, and often will not reveal which shares they own or what their long-term objectives are.

Last year the chancellor, Alistair Darling, warned that these funds would not be allowed to use their power unchecked.

"When a company is not acting in a commercial way or we have reason to believe it is going to make an investment where there is an issue of national security, then we have powers to take action," he said.

Darling is visiting China this week, and is due to meet with CIC.