Awash in U.S. currency accumulated during years of huge trade surpluses, China is starting to look beyond safe but low-yielding U.S. Treasury bonds as a place to invest its huge hoard of dollars.

The country has agreed to invest $3 billion in the Blackstone Group, the big American private equity firm, the Financial Times reports.

The newspaper says the investment suggests China is testing the water for a much bigger plunge into private equity. It could open the floodgates to a tide of capital flooding private equity firms just as regulators are becoming concerned that the private investment pools may already have too much capital to invest and may be overreaching.

Private equity firms have come under increasing criticism from politicians, unions, and regulators because they are using their increasingly large investment pools to buy companies employing many tens of thousands of people. They often use large loans in these deals, making the companies particularly vulnerable to an economic slowdown.

For Blackstone, which has filed for an initial public offering, China's action is a notable coup. A big investor in Blackstone told the Financial Times a rush of funds from China could cause private equity returns to suffer as they focused more on asset gathering than on performance of their assets.