Although election campaigns create fears, amplify them and exploit them, often in a rather artificial way, some of the nightmares about globalisation are less ephemeral and more revealing. One that emerged in 2005 is likely to keep on recurring during the next few years. It is the fear that companies from the new Asian powers are so cash-rich and ambitious that they are going to buy up a huge pile of corporate assets in the West. There is some justification to this fear. But it tends to overlook deep distinctions between the management styles and motivations of Indian and Chinese companies, and to forget how a similar fear of Japanese companies spooked commentators during the 1980s.

This fear is particularly potent if the buyer is owned by the government, or closely associated with it. The highest point so far of the scare was the attempted takeover bid in 2005 by China National Offshore Oil Corporation, known as CNOOC, for Unocal, a minor oil company by American standards that was nevertheless the world´s ninth-largest. At more than $18 billion it would certainly have been a big deal, in all senses, but the fact that CNOOC is state-owned caused more of a furore than the price. The bid was taken as some sort of a threat to America´s national security, given that the Chinese government—ie, the Communist Party—might end up owning an American oil firm. This fear made little real sense since most of the oil and gas reserves that Unocal actually owned were in South-East Asia, which is why CNOOC was interested. On that argument, Unocal had itself been a threat to the national security of the countries under which its reserves lay. In the end, however, CNOOC withdrew and Chevron, a bigger American oil firm, bought Unocal.

An Indian firm, Mittal Steel, also faced opposition a few months later when it made a bid for a Franco-Belgian-Luxembourg steel maker, Arcelor. Mittal is not state-owned and so raised no issues of political interference. In fact, it is not even truly Indian: its owner, Lakshmi Mittal, lives in London, his firm is registered in the Netherlands and he has made his fortune buying and refurbishing steel companies all over the world, but hardly at all in India. Even so, a big political row was caused by the very idea that a company run by an Indian should have the temerity to try to buy what had once been the crown jewel of French industry. Nicolas Sarkozy even attacked the deal long after it had been done, during his campaign for the French presidency in 2007, on grounds that France had sold its assets too cheaply and easily. Still, as that post-event criticism showed, Mittal Steel won the day: it had to pay 26.5 billion euros, then $33.1 billion, for the firm, which was 40% higher than its initial offer, so it was hardly a national firesale. The shareholders were all private and institutional investors in any case, so it wasn´t a national sale at all.

A few months later a genuinely Indian company, Tata Steel, followed Mittal´s example by buying another European steel firm, the Anglo-Dutch Corus, which had been formed by a merger between the two countries´ national steel firms. This was a smaller deal, costing $7.6 billion, and it provoked barely a murmer of opposition in either of the countries. The reason for that calm reaction lay in part in the difference between France, Britain and the Netherlands: unlike the French, the Dutch and the British have long been accustomed to foreign takeovers of their domestic firms, and their governments keep a greater distance from corporate affairs. The days when the steel industry was a totem of national strength or of trade union power in either country had long gone: in Britain, certainly, British Steel had ceased to be a cause celebre during Margaret Thatcher´s period of dominance of the country´s politics in the 1980s. But there was also, arguably, another reason: the Tata Group itself. That reason is indicative of what will become an increasingly important distinction between big Indian companies and their equivalents in China, and will distinguish the Indian globalisers from their Japanese forebears.

The Tata Group is India´s biggest company as well as one of its most venerable. Its origins go back further than most western companies, let alone Chinese ones. It can trace its history to 1868 when Jamsetji Nusserwanji Tata, a member of the Parsee community in Bombay, founded a private trading firm. The Parsees are Zoroastrians who migrated to India from Persia more than a thousand years ago. Tata entered the textile business in 1874; set up the Taj Mahal Palace Hotel in Bombay in 1903, reportedly after Mr Tata was denied entry to a British hotel in that city that had an apartheid policy; started a steel firm in 1907; an electric utility in 1910; an airline in 1932 that, when nationalised in 1953, became Air India; an engineering and locomotive maker in 1945 that is now Tata Motors; the country´s first software and outsourcing firm, Tata Consultancy Services, in 1968, which is also now the country´s biggest; and much much more, in all sorts of fields.

In European or American eyes a company like Tata is neither new and scary, unlike all Chinese firms, nor alien as Japanese firms seemed in the 1980s, nor ruthlessly entrepreneurial, as Mittal Steel may have seemed to Arcelor. If you visit Tata´s current boss, Ratan Tata, you find yourself in the presence of a kindly, courteous, gentle man—ambitious though this 71-year-old certainly is. He took the helm at Tata in 1991 when his uncle J.R.D Tata, who had run the company for 50 years, finally retired. Like any Indian conglomerate that had survived and more-or-less thrived during the years of strict licensing and government control, the Tata Group needed quite a shake-up once the government began to set markets free in that same year of 1991, which is what it has had. Now, as well as exploiting the expanding and freer Indian market, Mr Tata wants to expand globally too.

The purchase of Corus for Tata Steel was one example of that. A precursor was the purchase in 2000 of Tetley Tea for $435m, a move that combined a global brand with a very Indian product. Another was the purchase by Tata Motors of the trucks division of Daewoo of South Korea in 2004. Currently, about a third of Tata Group´s sales are overseas; the company expects the proportion to exceed 50% in about five years´ time. Cars may well prove a bellwether. Tata Motors chose, in the early 1990s, to develop its own cars rather than to form a joint venture with a foreign car-maker, as has been the choice made by all the major Chinese car producers. Now, Tata enjoys second place in the Indian car market, behind a joint venture between Suzuki of Japan and India´s Maruti, and has rolled out a series of its own new models. It is expanding abroad, first of all in South Africa where Tata had long had business links. Since its specialty is small, cheap, quite rugged cars it will at first expand chiefly in other emerging markets, including Latin America, Russia and other African countries, though it also has plans to sell cars in Italy and Spain. In January 2008 it hit the headlines when it unveiled the world´s cheapest ever car, the Tata Nano, the basic version of which will sell for just $2,500, and output of which could reach one million cars a year in a few years´ time. But it is also moving into luxury global car brands: in March 2008 it agreed to buy Land Rover and Jaguar from America´s Ford Motor Company.

Chinese car makers will benefit from lower manufacturing costs than Indian ones, and their more developed domestic market will give them an opportunity to exploit economies of scale. But although some Chinese firms will undoubtedly try to build overseas markets for their cars, it is a fair bet that Indian ones might be successful more quickly. Indian companies enjoy two principal advantages over Chinese ones, with regard to international expansion and the development of global brands.

One is that many are, like Tata, well-known and venerable and so have longstanding international commercial relationships: other examples include the Birla Group, which dates back even further than Tata to 1857, or Bajaj Auto, which makes two-wheelers, to 1945, or Mahindra and Mahindra, which makes tractors, trucks and 4WD cars, also to 1945. The second is that Indian firms have—or can draw upon—managers of all ages who have been educated and trained abroad, in western universities, business schools and multinational companies. That means that Indian executives are steeped in American and European methods of management, and so can easily work alongside western managers in an acquired firm. Neither managers nor trade unions in a company that an Indian firm bids for are likely to consider their potential owners to be any more alien or dangerous than a potential domestic bidder.

Many of today´s actively acquisitive Indian companies are family-run businesses, even if many of their shares are publicly traded, which does add one complicating element: executives at acquired firms may be sceptical about the quality of the family members, and will know that as outsiders they cannot aspire to become chief executive of the new group. But that can be true of American or European bidders too. It is not a uniquely Indian issue. It may anyway fade in importance as more family-run Indian firms seek to raise capital to expand globally, for by doing so they will take in new investors and dilute the founding family´s control as well as subjecting themselves to international standards of corporate governance. Anand Mahindra, the son of Mahindra and Mahindra´s founder and now the firm´s chief executive, is the only family member in the company´s senior ranks and says he may well be the last familial boss of the company.

Chinese companies, by contrast, look quite alien to non-Chinese eyes. Only since the early 1980s have many young Chinese gone abroad for education or experience. Future generations will benefit from an increased supply of Chinese managers who are comfortable with western methods, but there are currently fairly few such people in their 40s, 50s or 60s, unlike in India. Secondly, although management methods vary greatly in a country as large and diverse as China, it is fair to say that command-and-control styles of management remain the most prevalent. That makes it harder to fit together a Chinese acquirer and a European or American acquisition.

There have been two high-profile examples of such acquisitions, alongside many smaller ones. In 2004 Lenovo, a Chinese personal computer firm, bought IBM´s PC division for $2 billion. Having already changed its own name and brand from Legend to Lenovo, the Chinese firm was thus now adding IBM´s famous "Think-Pad" brand to its collection. A year earlier a consumer electronics firm, TCL, bought the TV business of France´s Thomson for $X billion, forming a joint venture with the French firm that is the world largest television manufacturer.

In both cases, the Chinese company was essentially trying to marry together its low production costs in China with a global brand, with the aim of gaining market share and profits abroad. Neither venture has gone well. TCL-Thomson Electronics, as the TV joint venture is called, has fared particularly badly. The firm found itself stuck with old, cathode-ray tube technology just as consumers were switching to flat screens, but also Chinese ownership and European distribution networks seem to have blended together especially poorly. In 2006, it closed or sold most of its European operations, dumped the Thomson brand and focused on selling sets to other firms to market under their own brands.

Lenovo has had a less rocky time but it has hardly conquered world markets either. Its purchase of IBM´s PC division was an attempt to shore up its then weakening domestic position rather than to expand globally: Lenovo commands a 35% market share in China, but stands in fourth place in a highly competitive global PC market, behind Hewlett-Packard, Dell and a Taiwanese firm, Acer, that bought an American brand name and distributor, Gateway, in 2007. Lenovo brought in an IBM executive, Steve Ward, to run the firm as chief executive, but forced him out a year after the merger as the marriage was looking rocky. The firm stuck with the idea of having a foreign boss, however, and to replace him hired William Amelio, another American who had previously been running Dell´s Asian business.

There have been Chinese purchases in the car business too, but so far just of small fry, in search of minor brands and technology. Nanjing Automobile bought the MG Rover car business in 2005 from Germany´s BMW and then shipped most of the equipment in its British factories back to China. In 2004 Shanghai Automotive Industry Corporation bought a controlling stake in South Korea´s fourth-largest car maker, Ssangyong, and, although outbid by Nanjing Auto for MG Rover held on to the copyrights for two Rover models which SAIC had already been involved in producing. There have been other, small overseas purchases in such businesses as motorcycles, machine tools and food processing. But so far there is no sign that Chinese companies are destined to follow the example of Japanese and South Korean firms by building global, branded businesses.

One reason is that it may simply be too soon. The Japanese export giants such as Toyota, Matsushita, Sony and Toshiba did not really start to shake the outside world until the 1970s and 1980s. The domestic market was their main preoccupation, just as it is in China. Until the 1980s, Japanese firms did not try to make big leaps abroad through acquisitions, focusing instead on steadier, organic growth through building overseas subsidiaries that could be established and managed in a typical Japanese way. Given the cultural problems in marrying together Chinese management and western employees in a takeover, the organic method may be a better bet for the Chinese too. Huawei, a big telecoms-equipment manufacturer that competes with America´s Cisco, is most people´s tip for a firm that could succeed in that way. So far, it has mainly expanded into other emerging markets where its low costs and ability to send in Chinese engineers are an advantage. It received a blow in early 2008 when pressure in America´s Congress forced it to withdraw from a proposed minority investment in an American electronics firm, 3Com.

It may be quite some time, though, before more than a handful of Chinese firms succeed internationally by organic means, either. Chinese companies, whether state-owned or private, rarely invest for the long term, developing their own technology or product innovations, because their domestic markets are changing so rapidly and because they are vulnerable to government interference and ever-shifting regulations. The most successful exporters tend to be Taiwanese subcontractors producing on the mainland such as Hon Hai in electronics or Yue Yuen in shoes, or else foreign multinationals. 

 What Chinese firms do have, however, is cash: a huge abundance of it. If there is to be "globalisation with Chinese characteristics", to twist Deng Xiaoping´s phrase, the main characteristic of it will be capital. In recent years Chinese corporate profits have been booming, and firms have managed to raise lots of money in the Shanghai and Hong Kong stockmarkets too. As well as corporate money there is official money to invest. Using its $1.4 trillion in foreign reserves, the government in 2007 set up the State Investment Company with a fund of $300 billion and a mandate to follow the example of similar funds in Kuwait and Singapore by building a portfolio of investments at home and overseas that would earn a higher return than the American Treasury bonds held in the foreign exchange reserves. It drew the headlines immediately when its first purchase was announced: an investment of $3 billion in Blackstone, an American private equity giant that was about to float its shares. When the shares did float, however, they promptly sank, putting the fund straight into the red. Nevertheless, with $300 billion to play with, the fun can afford to buy a few duds.

Chinese resources companies like CNOOC have been investing in mines and oilfields all over the world. That is easy to understand and causes few nightmares: China needs oil, copper, iron ore, nickel and countless other commodities, so it makes sense for Chinese firms to invest in the commodities´ supply. The sight of $300 billion sitting in official hands, some (thought to be $70 billion) of which is waiting to be spent on foreign assets, causes a rather more excitable response, however: western investment bankers slaver with glee at all the fees they can earn but politicians and pundits worry about national assets being bought up. In response to the new Chinese fund and to increasing interest from Russian state-owned firms in foreign acquisitions, Germany´s Chancellor Angela Merkel, normally a hard-headed, market-oriented sort of person, ordered a review of Germany´s procedures for vetting and approving foreign investments in German assets.

It is an odd sort of nightmare—though again it is explained by the way China still seems an alien place to Europeans and Americans. India and Japan would also balk at big Chinese investments in high-profile businesses such as ports, airlines, banks or telecoms, even though to do so is a form of self-harm. Someone wants to send you huge amounts of money. They will use it to buy ownership or stakes in assets that cannot simply be removed from your country: Nanjing Auto could ship out some old machine tools from MG´s British factories but the Chinese investment fund is not going to take away any real estate, or banks, or telecoms companies it buys. If it does, their value will disappear. So what really is the problem?

The answer most critics would give is control: the fear that foreign ownership, especially in hands linked to a foreign government, might mean that the foreign government gains control over something vital to your security or peace of mind. It is just about possible to imagine this fear coming true in the case of ownership of west European gas or oil distribution networks by Russia´s state-owned firms such as Gazprom, a possibility that has been much mooted in recent years: although Gazprom needs to keep buyers happy if it is to sell its gas, it is true that in the event of a political crisis the ability to turn off the gas supply might provide Russia with some leverage. It has that leverage merely as the supplier, however, not as the owner of a distribution channel, which since it resides in Britain, Germany or France could simply be nationalised in the event of a crisis. But still: there may be something to the fear. In the case of Chinese investors, however, it is hard to imagine a comparable example where politically important control or leverage could be lost.

The same nightmare came up, however, in the 1980s when Japanese firms suddenly found themselves wallowing in cash, and started to use it to buy assets in America: Rockefeller Center in New York, the Pebble Beach golf course in California, the Firestone tyre company in Ohio, Columbia Pictures and MCA in Hollywood. Newsweek described Sony´s purchase of Columbia in 1989 as "buying the soul of America", amid a Japanese "invasion" of Hollywood. Two American writers, Martin and Susan Tolchin, published a book in that year called "Buying into America: How Foreign Money is Changing the Face of our Nation", and they didn´t like what was happening to that face. It didn´t appear to have occurred to them that American firms had been "buying into" other countries for decades, and presumably changing their faces. At least in the 1960s, when a French writer, Jean-Jacques Servan-Schreiber, wrote "Le Defi Americain" ("The American Challenge") to warn of the success of American multinationals investing in Europe he was doing so as an act of admiration and in the hope that European firms might learn from the Americans.

The nightmare of Japanese capital ended, in part, because Japan´s cash disappeared when its stock and property markets collapsed in the early 1990s. But the nightmare for Americans and Europeans also ended when they discovered that these lavish overseas acquisitions had in fact proved to be a nightmare for their Japanese owners. Sony and Matsushita lost billions in Hollywood. Bridgestone struggled for years to get a profitable grip on Firestone. Real estate investments such as Rockefeller Center, the Four Seasons Hotel in Manhattan, Pebble Beach, and countless resorts in Hawaii turned out to be disasters, bringing in some cases catastrophic losses. Not all Japan´s overseas investments turned out to be duds, just as not all China´s will do so either. But enough did fail to make it clear that Chinese capital is not something to be afraid of. That will not, however, make the nightmares go away.