FROM boardrooms in Britain and Australia to the frozen highways south of the Yangtze, the hand of the Chinese state has been felt heavily as the Year of the Pig gives way to the Year of the Rat.

China’s government did not hesitate to impose drastic economic edicts to cope with the worst winter crisis in half a century, which paralysed half the nation as tens of millions tried to make their way home for the new year holidays.

“The party and the government serve the people and will help the people,” proclaimed the prime minister, Wen Jiabao.

Party leaders sent in the army to deal with frozen power lines and railways, ordered miners to stay at their posts and diverted ships from the ocean-going fleet operated by a state-owned line, Cosco Group, to deliver coal to coastal home ports.

Chinese power stations depend on coal for 70% of their energy. These decisive moves rebuilt stocks that had fallen dangerously low as city after city had succumbed to power cuts and factories fell silent.

Officials then clamped price controls on food to stop merchants from exploiting short-term shortages. The party already fears public anger over soaring prices for pork, up more than 50% in a year, and cooking oil, which has risen in price by about 35%.

The edict came from the National Development and Reform Commission, whose modest title belies its influence over a swathe of economic life.

Its political task is to manage the economy in a sensitive period ahead of the Olympic Games in Beijing this summer.

The commission’s technocrats are mindful that inflation destroyed the Kuomintang regime in 1948-9 and contributed to mass demonstrations that ended in the Tiananmen Square massacre of 1989.

But if this time the government was seen by many Chinese as intervening benevolently in a moment of crisis, the display of its authority was a reminder that China remains a country in transition between Marxism and a form of state-directed capitalism.

The extent of that authority matters when dealing with enormous Chinese firms, flush with cash, owned or influenced by the state, that have recently emerged as players in global markets.

Exhibit A for the sceptics is the Aluminium Corporation of China, known as Chinalco, which dramatically thrust itself into the contest for Rio Tinto, taking a joint £7 billion stake in the British-based mining company to acquire 12% of its shares with Alcoa of the United States.

The coup was widely seen as a riposte to a bid by Australia’s BHP Billiton to acquire Rio Tinto. China is believed to fear the emergence of a titan that would be able to dictate quasi-monopoly prices for commodities vital to its interests.

Yet Chinalco’s suave 49-year-old president, Xiao Yaqing, told people in London and Sydney that it was a purely commercial investment whose objective “is to make a return”.

Chinalco’s attempt to distance itself from hints of politically motivated sovereign investment were undercut by the fact that the Chinese foreign minister, Yang Jiechi, also appointed himself a de facto spokesman for the deal, while insisting it was a matter for the company alone.

Chinese business journalists say that is nonsense. Chinalco is a state-owned entity and its president, Xiao, is a politically sound appointee who has the approval of the State Council, which is China’s cabinet.

Funds for the Rio Tinto investment are reported to have come, in part, from China Development Bank, about whose status there is no doubt. It is a state-controlled financial institution that also answers to the State Council.

“Nobody would dare to make a strategic decision like this without absolute approval from the leadership,” a Chinese investment banker commented.

Australian regulators will be taking a close look at the ownership structure of Chinalco as they weigh up the effect of Chinese investment in mines owned by Rio Tinto that are critical to the commodity-rich nation’s economy.

The episode showed how issues of sovereign investment and state intervention have risen up the agenda for all China’s major trading partners.

“Socialist China Reasserts Control Over Private Sector,” read a headline in the influential Japanese business daily, Nihon Keizai Shimbun last week.

The article was a rare piece of public commentary on the growing disquiet among powerful Japanese corporations that have become hugely important investors in manufacturing and services in China.

China imports more goods from Japan than from any other nation, while Japan is the third most important market for Chinese exports.

The commentary singled out government control over retail fuel prices, which it said was losing oil companies money and leading to fuel shortages. The policy has caused the stock price of PetroChina to fall by almost half in the past three months.

The newspaper also criticised Chinese moves to block a major investment from Singapore Airlines in China Eastern Airlines. It said that steelmakers faced ruin because of official interference and blamed a strict new labour protection law for mass lay-offs in clothing, textiles and retailing.

“What is causing China’s retrenchment?” it asked. “One factor is the country’s half-hearted shift to a market economy. The authoritarian government and companies with little respect for the law are two sides of the same coin,” it said.

The Chinese model is a conundrum for global investors, for multinational corporations that could be takeover targets, and for the G7 governments that regulate them.

On the one hand, its traditional socialism provides clarity about official policy. For example, The People’s Bank of China is constitutionally “under the leadership of the State Council” and takes “guidance” from it.

So there can be little doubt that the central bank’s six inter-est-rate increases and repeated rises in bank reserve requirements do reflect a determination at the top to cool the economy.

The World Bank estimated last week that growth in 2008 would ease to 9.8% from the double-digit increases of recent years, indicating that the tightening may have some effect.

But it is much harder to assess motives and goals in the mixture of state and private sectors that increasingly characterises the Chinese corporate landscape and the stock markets.

A surge in the Shanghai stock index last week was widely put down to overt intervention by different state actors. The bench-mark index went up by more than 8% on buying that dealers said was driven by institutions.

It was spurred by a well-timed decision by regulators to approve two new mutual funds that will invest in equities. The supply/demand equation was also tightened by the regulators’ decision to order China Railway Construction to postpone a domestic initial public offering that would have been worth more than £2 billion.

In case any executives failed to get the point, readers of the People’s Daily opened their papers last Monday to discover a hostile commentary aimed at one of the country’s biggest insurers, Ping An Insurance, in which HSBC holds a stake.

The firm was reportedly planning a share issue worth more than £10 billion that would help it to amass cash to fund a major overseas investment – leading to market speculation that the UK’s Prudential is a target.

The news had depressed share prices as investors feared too many new issues would flood the market.

In Shanghai’s new financial district of Pudong, the favoured daily reading is the Shanghai Securities News and its business-minded competitors.

But evidently the prudent investor should still keep a weather eye on the People’s Daily, a mouthpiece for the real leaders of China on the long, slow road from Maoism to the marketplace.

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