David Prosser: China is set to drive a hard bargain

Outlook You can't fault China for its opportunism. Stymied for years by Western nervousness about its economic power, China quickly recognised the global downturn as its chance to take a stake in strategic resources and commercial assets all over the world. Its latest target is the automotive sector.

Western car producers have long been concerned about their intellectual property – particularly design technology and engineering skills – falling into the hands of China's domestic auto-makers. With China set to become the world's largest market for vehicles as soon as this year, the world's car giants want to safeguard their slice of the action, rather than seeing more effective competition from local rivals.

Now, however, a more practical concern is coming to the fore – many Western car companies cannot go on without fresh funding and China is one of the few sources of capital to which they can turn.

They know this well in Sweden. Yesterday, it emerged that Koenigsegg's purchase of Saab from GM will be part-funded by cash from Beijing Automotive, which will take a minority stake in the consortium behind the deal. Meanwhile, down the road at Volvo, it was becoming clear that China's Geely Automotive is the only bidder so far for Ford's Swedish business.

The American car giants are getting used to doing business with the Chinese. GM has already agreed to sell its Hummer operation to a Chinese engineering concern, and it also turned down a bid from Beijing Automotive from its European operation, including Vauxhall of the UK.

In the short term, you can see the rationale for these deals. Western auto companies need the cash China can provide and joint ventures offer huge opportunities in a country where car sales rose 90 per cent, year-on-year in August, and are projected to top 12 million this year. And unlike the West, Chinese car buyers still seem to be very keen on large (and expensive) gas-guzzling models, despite the tax breaks on offer for cheaper, greener vehicles.

Over time, however, selling up to the Chinese isn't likely to be a strategy that leaves Sweden – or the UK or the US – with a viable car production industry. The debate about whether Geely can succeed with Volvo where Ford has failed rather misses the point. The prize at Volvo is the company's engineering knowhow, which will give its Chinese buyer an advantage back home.

There can be no certainty about China's long-term commitment to the Western auto-makers being partially or fully acquired. Once they have served their purpose – adding expertise and tooling to the low-cost production lines in China – they may be disposed of, certainly in the context of the mass market. The folks at MG Rover know a thing or two about this. When Nanjing Automotive bought their company in 2006, it moved their mass production facilities to China almost overnight. All that remains in the UK is a specialist production facility employing a handful of staff at the Longbridge plant in Birmingham.

That's not to accuse Nanjing – or other Chinese auto-makers – of going back on their word. In the former's case, there was never any suggestion that a mass market facility would be maintained or constructed in the UK. And after paying to equip itself with the right technology, why should China employ Western workers when willing – and cheaper – hands are available back home? For many years, Western car companies complained that the Chinese were simply ripping off their designs, producing imitations of their vehicles that lacked the sophisticated engineering but undercut them on price. Now China is riding to the rescue, the auto makers can have no such complaints should they discover the future under their new owners is not so bright.

Still for Western governments, which are playing a leading role in deciding who should be allowed to invest in these companies, China's interest should ring alarm bells. Jobs may be preserved in the short term, but don't expect them to last forever.