A Chinese sovereign wealth fund is poised to buy a stake in the water network that serves London, in what would be the fund’s first acquisition in the UK following investment talks with British politicians.

The deal follows a visit to China this week by chancellor George Osborne, who has been urging Chinese investors to inject money into British infrastructure projects. Beijing has been seeking more lucrative returns than those available from low-yielding government bonds.

The acquisition of up to 10 per cent of the holding company that owns Thames Water is close to being agreed by China Investment Corporation, the country’s $410bn sovereign wealth fund, according to one person familiar with the situation. The Chinese investment was confirmed by a senior government official.