The former empire strikes back

Is it a great opportunity for mutual benefit or a case of the empire striking back? While Indians are investing in British steel, cars, tea and oil refining, the Chinese are piling into sensitive areas from telecoms to nuclear power, seen by some as turning the tables on a foreign power blamed for stirring the 19th-century Opium Wars.

The UK's top sources of inward investment projects in 2012-13 were the US followed by Japan, France and Italy, according to official data. But India was the fifth largest source of projects and the third most important for creating new jobs.

While the number of individual projects from China – which was seventh – declined, the level of associated new and safeguarded jobs increased, indicating that Chinese companies are placing larger projects in the UK.

Britain is also continuing to attract steadily increasing numbers of projects from emerging high-growth economies such as Turkey, South Africa, Malaysia, Mexico, Brazil, the Gulf and Russia.

But it is communist China that is creating the most excitement and, some believe, carries the greatest dangers. David Cameron, the prime minister, is expected to visit Beijing shortly, following recent trips by George Osborne, chancellor of the exchequer and London mayor Boris Johnson. Relations have thawed since Mr Cameron angered Beijing by meeting the Dalai Lama, Tibet's spiritual leader, early last year.

Two state-owned Chinese companies, China General Nuclear Power Group and China National Nuclear Corp, are taking a 30-35 per cent stake in French utility EDF's project to build a ￡16bn nuclear power station at Hinkley Point in Somerset, southwest England.

China Investment Corp, a sovereign wealth fund, owns 9 per cent of Thames Water and has discussed investing in the Thames super-sewer, a giant ￡4bn project under London. CIC, which has more than $400bn of assets, also owns about a third of Canary Wharf, the Docklands estate. Last November it took a 10 per cent stake in Heathrow airport for ￡450m.

Other potential areas for Chinese involvement include wind farms and the High Speed 2 rail project. The whole of MG Rover, Manganese Bronze, which makes London's black cabs, and 60 per cent of Weetabix cereals are also in Chinese hands.

Meanwhile, Chinese investors are also backing a ￡650m business district at Manchester airport. Advanced Business Park, a Chinese property developer, plans to turn London's Royal Albert Docks into a ￡1bn “Asian business port”, an office complex, while Dalian Wanda is to build a five-star hotel in a ￡700m development by the Thames.

Wanda has also bought Dorset yachtmaker Sunseeker for ￡300m. “We wanted to buy 30 Sunseeker yachts because we are planning to build three marinas here in China,” said Wang Jianlin, chairman. “So then we thought it would be a better deal if we just bought the company.”

To Beijing, the UK is attractive as an open economy with a strong legal framework and political stability. It wants to create multinational companies as it shifts from basic manufacturing to higher-margin sectors. Some of the deals give it access to valuable technology.

While some people worry that -Britain will be constrained from speaking out on human rights issues, there is less official concern about the security implications of Chinese investment than in the US. The UK government is relying on regulators to handle any security, safety and financial stability issues that arise.

But US bankers attacked a new light-touch regulatory regime proposed for Chinese banks in the City of London, under which they would be able to operate via branches rather than as full-blown subsidiaries.

Perhaps the most contentious -Chinese investment in Britain is by Huawei as part of a big BT upgrade of its telecoms infrastructure. The regulatory system put in place to oversee Huawei’s operations has been criticised by a parliamentary committee, but the Chinese company's equipment is now integral to Britain's digital networks.

The biggest Indian investor is the Tata group, whose 50,000-strong UK workforce means it is vying with -British Aerospace to be the country's largest manufacturer. It first opened an outpost in London in 1907 to buy supplies for its Indian operations, and Tata Consultancy Services, which -pioneered the outsourcing of computing to India, opened in 1975.

Tata bought Tetley tea in 2000, Brunner Mond chemical company in 2006, the Corus steel business in 2007 and Jaguar Land Rover in 2008.

Those purchases have proved a mixed bag for Tata. JLR has boomed, driven by sales in emerging -markets, but Tata Steel has been hit by weak European demand. It recently announced 500 job cuts in northeast England.

Britain is the favourite destination for Indian companies with about $30bn invested, or about a quarter of India's outbound FDI stock.

Essar, an Indian conglomerate, bought the Stanlow oil refinery in Cheshire this year. Meanwhile, Blackburn Rovers football club is owned by VH Group, an Indian poultry -company.

From the Gulf, Dubai's DP World has just opened London Gateway, an ambitious ￡1.5bn container terminal in Essex.

A Malaysian consortium last year bought London's Battersea Power -Station for ￡400m and plans to develop it with the help of architects Frank Gehry and Lord Foster. The developers believe the residential and retail project will be worth ￡8bn by the time it is completed.

Malaysia spent ￡1.4bn, almost all of it in London, last year – more than any other Asian state – snapping up City offices as well as the Battersea site. Now its government pension fund plans to buy even more UK property assets.

“We like London; we know it well and understand it and you can get a very good yield on London offices,” said Najib Razak, Malaysia's prime minister.