The deal gives China Investment Corp (CIC) a stake worth £221 million (US$365 million) in the UK-based group, making it Diageo's ninth largest shareholder, the London-based newspaper reported.
The move marked a shift in CIC's investment strategy from the financial sector to wider markets and asset classes, the report said.
CIC has faced severe criticism at home for its investment choices such as US financial companies Blackstone and Morgan Stanley, after the collapse of global markets led to heavy paper losses.
However, the fund recently restarted buying after share prices of foreign firms plunged amid the crisis, while markets initially hostile to sovereign funds have softened their stance towards Chinese money, the paper said.
In recent months CIC has bought stakes in a Canadian miner and an Australian property trust, and increased its stake in Morgan Stanley, the report said.
The fund, which manages part of China's $2.13-trillion forex reserves, holds a 9.9% stake in Morgan Stanley and also owns more than 10% of private-equity firm Blackstone.
The Financial Times said it also has 0.5% of Britain's largest retailer Tesco.
Diageo, which owns popular alcohol brands including Smirnoff and Baileys, expects China to rival the US as one of its most important markets by 2021, the report said.
Last month it launched a China-made vodka called Shanghai White in Hong Kong and plans to extend distribution elsewhere in China, the paper added.
Source: AFP
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