At last, China has taken its first premium league western automotive scalp. Today's takeover of Volvo by Geely probably marks the point at which the West really wakes up to the competitive threat from the People's Republic.

Until now, Chinese carmakers have not managed much more than to hoover up scraps from the West's automotive industry. In 2005, SAIC and Nanjing fought over the remains of MG Rover, picking up some aged engines and plaforms.Last year, in the wake of the global meltdown, Beijing Automotive tried to muscle in on Saab's near-demise, but it had to satisfy itself with the rights and tools to build the old 9-5 and 2003 9-3 models. Tiny Tengzhong also made an unsuccessful attempt to buy Hummer from GM.

But now the Chinese have hit the bulls eye. The deal (which is expected to see $1.8bn change hands, somewhat less than the $6bn or so Ford paid for Volvo in 1999) will see China's largest privately owned carmaker become a global player.

It's all the more remarkable to think that Geely is only China's tenth largest carmaker, with modest sales of around 400,000 cars per year (though it is aiming for 2m by 2015). Having said that, ailing loss-making Volvo saw its sales tumble to below 330,000 units last year.

Geely might be restricted on what it can do with Ford-owned technology, but the possibilities are enormous. Buying Volvo not only gives Geely a global brand and a global presence, it also has access to cutting edge technology and an engineering capability that leads the world on safety, electronic systems and some impressive drivetrain technology.

Indeed, in yesterday's Telegraph newspaper, Nick Reilly, boss of GM Europe, gave warning of what the Chinese are already doing under their own steam.

He said China's progress in automotive technology, quality and innovation was 'really remarkable' and warned that the Western car industry did not have a decade or more leeway before China became globally competitive.

With the all-powerful Chinese state behind Geely's move (by remarkable coincidence the Chinese vice president Xi Jinping is currently on a state visit to Sweden), company owner Li Shufu will be one of the most men in the industry.

Shufu started in business with a small photographic studio and grew his interests into engineering, rescuing a dying motorcycle maker before establishing Geely.

But he's now got a bigger task on his hands; Turning Volvo around will be very hard. It's a company that tried to re-invent itself but has clearly failed. A big sales boost in China for Volvo in China is certain. But sales in West will remain subdued until the maker nails down a convincing philosophy and translate it into metal.

Still, it's extraordinary to think that the new S60 saloon will be launched under the Red Flag. But it's also bizarre to think that Volvo's sister models now include the London Black Cab, via Geely's partnership with Coventry-based Manganese Bronze.

Still, there could be some technology transfer. I quite fancy the idea that the streets of the capital might soon reverberate to the warble of taxis that are made in China, assembled in Coventry and powered by five-cylinder Swedish diesel engines.