The news that Nanjing Automotive had succeeded in its bid to buy failing car company MG Rover, 22nd July, was greeted as yet more evidence of Chinese economic strength. 'There is a new kid on the world's economic and political block; everything is going to change' -- Will Hutton. As former editor of the Observer and Chief Executive of the Work Foundation (a business think tank, formerly the Industrial Society), Hutton is a good indicator of what the UK elite are thinking -- and it seems that they view China's rising economy with both excitement and a frisson of fear. Excitement, because the emergence of a huge industrial base and over a billion consumers will give a tremendous boost to the world economy. Fear, because they see that the new Chinese businesses will mean hard competition for the more established economies. There is also a lingering worry that the Chinese ruling elite are still, at base, ruthless communists and inscrutable mandarins -- in Hutton's words, 'China's communists are a kind of contemporary Confucian oligarchy'.

With China's GDP growth often a phenomenal 9% (compared to Britain's c.2%) there is massive scope for serious returns on corporate investment. China has recently joined the World Trade Organisation, and is therefore in the process of opening up 'banking and finance, telecom, logistics and distribution, transportation, and retail and wholesale businesses' to corporate investment. Entry into the WTO is only the latest part of China's participation in the world economy. Since 1991 it has been a member of the Asia-Pacific Economic Co-operation, an 'open trade' grouping that includes most south-east Asian and Australasian countries, as well as the US, Canada, Chile and Mexico, and which had already endorsed major aspects of GATT (later WTO) free trade doctrine.

China's move towards developing successful corporations is not a new development, either. In 1978 market reforms were launched by the Chinese Communist Party (CPC) under Deng Xiaoping as an attempt to overcome economic weakness such as reliance on grain imports. Special Economic Zones (SEZs) were set up, areas where foreign companies could operate without heavy taxation or government control -- while profiting from China's plentiful labour force and the CPC's social control. These changes coincided with the ousting of Mao's old guard from power, and the beginning of diplomatic relations with the US. By 1997 the changes within China had caused the CPC leadership under Jiang Zemin to proclaim that capitalists and private entrepreneurs were a valid part of the communist system.

The combination of market capitalism and social dictatorship has proved very successful -- one could argue that it creates perfect conditions for corporations. Some western observers are still sceptical, however, of the extent to which China has genuinely moved towards a market system. In July 2005 Peter Mandelson, the EU trade commissioner, stated that, because of continuing 'state-created distortions in the economy', China could not be considered a proper market-based economy -- and this therefore justified the blocking of China's exports in some circumstances where they would drastically undercut local production. Does this mean that the Chinese communists are now better at the game of 'free trade' than its western neo-liberal supporters? The Chinese economy remains a mix of state-owned and private companies. State owned enterprises employ around 375 million workers and own more than half of China's industrial assets, while generating just 17% of GDP. Many of the largest 'Chinese' corporations are companies that have been based in Hong Kong ever since the British colonised it, and this is reflected in the largely non-Chinese nature of many management boards. The question of what makes a 'Chinese' corporation is therefore a thorny one, added to which is the special administrative nature of Hong Kong, which has given a measure of autonomy to its local business elite.

The bid by the China National Offshore Oil Company (CNOOC) for its US rival Unocal has been seen as raising real security issues for the US, as the red menace seem to be threatening US oil control using the weapon of a handful of dollar bills, and Chevron has been accused of stoking anti-China sentiment in its attempts to torpedo the CNOOC bid in favour of its own offer. However, the US dollars that China keeps on buying up are a major reason why the US economy can continue to keep afloat by borrowing trillions. Like it or not, the US and Chinese economies are locked into a common system. Even Chevron and CNOOC's rivalry is tempered by the fact that CNOOC is currently buying $22bn worth of gas from Chevron's Australian fields.

The belief that a common economic system and international trade will forestall international conflict is common among capitalist philosophers. However, the splintering of a previous globalised system by the outbreak of the First World War showed that rational liberal economics are not the only motives that drive foreign relations. China is undergoing massive social tension due to rapid industrialisation. The stress is manifesting itself in a serious suicide and depression problem -- with people taking their lives every day. Conflicts over the closure of factories, pollution or police brutality are common; even the government admits that in 2004 China saw 58,000 violent protests take place, involving more than three million people. Significantly, many of these protests were anti-Japanese. China and Japan are linked closely by trade and investment, but the political classes of both countries still flirt with dangerous forms of nationalism. Japan was the dominant power in the region from 1898, when it defeated China and occupied Korea. During the 1930s, Japan occupied vast stretches of China and inflicted serious atrocities on millions. Chinese and Japanese textbooks interpret this history in different ways, to draw attention to their own imperial might. Under pressure from social discontent at the rapid pace of change it is not impossible that the Chinese ruling class will take the route of encouraging nationalism and scapegoating in order to deflect blame and reaffirm the sense of 'national community.'

Many issues have not been touched on -- such as the ongoing dispute over Taiwan, itself a host to many major corporations, or the accelerating destruction of China's environment. However, UK activist understanding of China's role in the global economy is currently lagging well behind events. Arguably, China's increased need for fuel is one major cause of the Afghanistan and Iraq wars, and the US seeks to control the remaining reserves. An associated game is being played out in Central Asia, as companies fight for control of the natural gas reserves.

A brief list of some of the biggest Chinese corporations:

For comparison, Sainsburys has sales of $28,497m and profits of $703m, and UK construction firm AMEC has profits of $38m.

"Sinopec. Revenues $75,076.7m. Profits -- $1,268.9m. Petroleum and chemical corporation that is linked to Shell and has operated in Sudan. http://english.sinopec.com/index.jsp
"State Grid. Revenues $71,290.2m. Profits $694.0m. National power grid of China. Run by central government.
"China National |Petroleum Company. Revenues $67,723.8m. Profits $8,757.1m. Owns several subsidiaries, such as PetroChina, which BP heavily invests in. Involved in the exploitation of Tibet's oil and gas reserves.
"Hutchison Whampoa. Profits $16,128m. Biggest transnational in the 'developing world'. Owns the pioneering mobile phone brand '3', as well as a range of shipping interests, including Felixtowe docks in the UK.
"Jardine Matheson Holdings: Revenues $8,970m. Profits $1,483m. A giant in the Asian dairy industry as well as in the landowning and hotel trades.
"Citic Pacific. Profits HK$ 3,351m. Runs power generation, aviation and communications, among other interests.