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In an apparent reflection of Chinese anxiety over its reputation in Africa, both embassies and companies have been urged by Beijing to forge closer links to local communities.China has also entered into a partnership with Britain's department for international development, (Dfid)intended to monitor and control the social and environmental impact of Chinese investment.

As it struggles to stay afloat, GM has deepened cuts that will include 23,000 job losses by 2011, the closure of 16 of its 47 factories in the US and a 42% drop in the number of dealers selling its vehicles.

GM announced it was shutting its 83-year-old Pontiac marque as it slims its portfolio of brands to focus on just four names in the US: Chevrolet, Cadillac, Buick and GMC. The gas-guzzling Hummer and Sweden's Saab will either be sold or closed by next year but GM made it clear that Britain's Vauxhall brand was not under threat.

Under the company's plan, the US treasury and the United Auto Workers' union would get 89% of the company between them. In return, the government would write off half of the emergency lending extended to GM by US taxpayers.The union's shares would replace the billions of dollars due to be pumped into a trust fund to cover employees' healthcare.

GM has offered a 10% stake to bondholders, who are owed $27bn – a tough proposition to swallow. For each $1,000 of loan notes, bondholders would get 225 shares, worth little more than $550 at today's market price.

The Obama administration insisted that private-sector creditors should get no more than this slim return, demanding that unions and taxpayers receive the lion's share of the company. But in order to proceed, the proposal must be accepted by an overwhelming majority of 90% of bondholders by a deadline of 1 June.

An ad hoc committee representing bondholders last night vigorously objected to the carve-up: "We believe the offer to be a blatant disregard of fairness for the bondholders who have funded this company and amounts to using taxpayer money to show political favouritism of one creditor over another."

Rebecca Lindland, an analyst at IHS Global Insight, said many bondholders were likely to believe they could get a better deal under a bankruptcy arrangement: "The Obama administration may be more pro-union than a bankruptcy judge but it's really a roll of the dice."

GM's smaller rival, Chrysler, has a deadline of Thursday to strike a rescue deal with Italy's Fiat without which the US government has said it will withdraw financial support. Daimler assisted the process last night by in effect writing off its 19.9% stake in Chrysler and $1.9bn in loans.

For GM, the challenge is to shrink to a scale where it can break even with sales of 10m cars in the US annually, rather than the previous rate of 15m to 17m.

While President Mahmoud Ahmadinejad continues to make belligerent noises about Israel and the West, others in Tehran have hinted that they're ready for a change. In a Mar. 21 speech, Supreme Leader Ali Khamenei trotted out standard anti-American rhetoric but also indicated a willingness to talk. And Ahmadinejad's probable opponent in the June presidential election, former Prime Minister Mir Hossein Moussavi, favors negotiations with the US. "Obama has prompted Iranians to have an open debate about the relationship they want to have with the US," says Gary Sick, an Iran specialist at Columbia University in New York. "This is something that hasn't been seen in 30 years."

Most Iranian executives seem to be rooting for Moussavi. Although he is an old-guard leftist, businesspeople hope he would lead a reform-minded administration that could ease Iran's isolation. "Ahmadinejad has done serious damage to Iran's reputation and the reputation of Iranian business," says Mohammad Reza Behzadian, a former head of the Tehran Chamber of Commerce who runs Tondar Middle East, a trading company in Tehran.

Facing pressure from Washington, major European banks have stopped doing business in the country. So Iranians must pay exorbitant rates for trade financing from second- and third-tier banks in Europe, the Middle East, and Asia. Some Iranians work around the restrictions by setting up subsidiaries in the United Arab Emirates and playing cat-and-mouse with American inspectors. But such solutions are expensive, adding billions of dollars to Iran's soaring import bill-$57 billion for the year that ended in March. "It's a challenge finding banks that we can trust," says Parviz Aghili, CEO of Karafarin Bank in Tehran.

Sanctions also restrict the development of Iran's vital energy reserves. Tehran wants to boost oil production capacity by 25 percent, to 5 million barrels a day, but with little foreign help and aging fields in rapid decline, it's tough even to maintain current output. That's one reason Iranian oil officials are quick to say they want American help. "We don't have any problems with US investment," says M.A. Khatibi Tabatabaei, Iran's representative on OPEC's board of governors.

Ahmadinejad's erratic policies make things worse. The populist President has spent freely on everything from loans to small businesses of questionable viability to imported food and cash handouts for the poor. And he has pressured banks to shovel out easy credit, leading to a real estate boom. But worried that oil earnings will start to peter out, the central bank has tightened up, starving factories of capital and prompting a sharp fall in property prices.

Last year, when oil prices surged, the Iranian economy could shrug off its problems. With oil's steep decline and the global financial crunch, though, some fear social unrest. Many factories are months behind on salaries, says Ali Reza Mahjoub, a member of Parliament and head of Workers' House, a labor group. He estimates that unemployment, officially 12.5 oercent, is really closer to 17 oercent. As financing dries up, building is grinding to a halt, says developer Amir-Mohamad Mazaheri. "This is a very dangerous situation," he says, puffing on a cigarette in a new tower in North Tehran. "There will be 3-4 million construction workers looking to any activity to support themselves."

Even with sanctions in place, savvy foreigners have managed to make a mark in Iran-though it takes persistence. Renault, for instance, has a $200 million joint venture to build the Logan compact. But late payments from the Iranians and difficulties training enough suppliers to meet a requirement of 60 percent local content have slowed progress, Renault says. The venture, Renault Pars, has cut its output target for the Logan by 25 percent, to 150,000 cars per year. "You need a lot of time and energy," says Renault Pars chief Jean-Michel Kerebel. "What takes five hours in Europe could take five days here."

Local giants Lockheed Martin and General Dynamics also run substantial government-support operations and would see some weapons projects cut, while other programs would receive budget increases.

In particular, the proposed budget would sharply reduce the number of contractors who help the Pentagon oversee and manage its vast weapons-buying apparatus following a string of reports chronicling cost overruns and other problems.

A CACI executive said the company is waiting for further details before commenting. The Arlington company has 12,300 employees, half of whom are in the D.C. region. Ninety-five percent of its $2.4 billion in revenue last year came from federal contracts for technical services and information technology and contracting oversight for the Army and Navy, as well as such Pentagon offices as the Defense Advanced Research Projects Agency and the Missile Defense Agency.

Overall, the budget Gates proposed calls for major cuts to the weapons programs of some of the largest contractors.

One of the hardest-hit defense firms was Boeing. The Chicago company's $150 billion Future Combat Systems, a family of Army vehicles linked by high-tech communications, came under criticism from Gates for being costly and plagued by development problems. He proposed canceling the $87 billion vehicle part of the system -- a move that would hurt Boeing, SAIC and their subcontractors, BAE and General Dynamics.

Gates also proposed canceling some of Boeing's missile defense programs, including one to equip a modified 747 aircraft with a laser that can shoot down missiles soon after they're launched, saying the program "has significant affordability and technology problems and the program's proposed operational role is highly questionable."

Boeing would also be hurt because it makes one-third of the F-22 fighter jet and the Pentagon plans to stop ordering additional aircraft. Gates would also cancel the Air Force's program to build a new search-and-rescue helicopter, which had been awarded to Boeing. And it would not order more of Boeing's C-17 cargo planes. Boeing could also see a military satellite program, known as TSAT, end.

Lockheed Martin, of Bethesda, the biggest defense contractor in the world, also took hits on several of its major programs.

Gates said he would kill the company's bid to build the presidential helicopter, known as the VH-71, citing the fact that the program is six years late and has gone from initial estimates of $6 billion to $13 billion.

Lockheed was also hit by the move to not order more F-22 fighter jets. Perhaps hoping for support in Congress, the company has taken out newspaper ads explaining how its F-22 supports roughly 25,000 jobs around the country.

But the Pentagon proposed ordering more of Lockheed's F-35 known as the Joint Strike Fighter, and it would increase from two to three the number of littoral combat ships being built by Lockheed and General Dynamics to patrol near enemy coastlines.

The 1979 revolution expropriated the assets of foreign investors and the nation's wealthiest families; oil had long been nationalized, but the mullahs seized virtually everything else of value--banks, hotels, car and chemical companies, makers of drugs and consumer goods. What distinguishes Iran is that many of these assets were given to Islamic charitable foundations, controlled by the clerics. According to businessmen and former foundation executives, the charities now serve as slush funds for the mullahs and their supporters.

Dozens of interviews with businessmen, merchants, economists and former ministers and other top government officials reveal a picture of a dictatorship run by a shadow government that--the U.S. State Department suspects--finances terrorist groups abroad through a shadow foreign policy. Its economy is dominated by shadow business empires and its power is protected by a shadow army of enforcers.

Ironically, the man most adept at manipulating this hidden power structure is one of Iran's best-known characters--Ali Akbar Hashemi Rafsanjani, who has been named an ayatollah, or religious leader. He was the speaker of parliament and Khomeini's right-hand man in the 1980s, president of Iran from 1989 to 1997 and is now chairman of the powerful Expediency Council, which resolves disputes between the clerical establishment and parliament. Rafsanjani has more or less run the Islamic Republic for the past 24 years.

He played it smart, aligning himself in the 1960s with factions led by Ayatollah Khomeini, then becoming the go-to guy after the revolution. A hard-liner ideologically, Rafsanjani nonetheless has a pragmatic streak. He convinced Khomeini to end the Iran-Iraq war and broke Iran's international isolation by establishing trade relations with the Soviet Union, China, Saudi Arabia and the United Arab Emirates. In the 1990s he restarted Iran's nuclear program. He is also the father of Iran's "privatization" program. During his presidency the stock market was revived, some government companies were sold to insiders, foreign trade was liberalized and the oil sector was opened up to private companies. Most of the good properties and contracts, say dissident members of Iran's Chamber of Commerce, ended up in the hands of mullahs, their associates and, not least, Rafsanjani's own family, who rose from modest origins as small-scale pistachio farmers.

If a North Korea link is found, it would mark a new turn in Pyongyang's attempts to lash out at the U.S. North Korea has been building up its capability for cyberattacks in the past couple of years, computer security specialists said. North Korea recently increased the number of people in a cyber-warfare unit, South Korea's Yonhap news agency reported last month.

U.S. government Web sites attacked included those of the Defense Department, National Security Agency, Treasury Department, Secret Service, State Department, Federal Trade Commission and Federal Aviation Administration, according to the cyber-security unit of VeriSign Inc., a computer-security company, and others familiar with the attacks. The attacks appear to have occurred roughly from Saturday to Tuesday.

Private sites attacked, according to a cyber-security specialist who has been tracking the incidents, included those run by the New York Stock Exchange, Nasdaq, the Washington Post, Amazon.com and MarketWatch.

Most U.S. federal Web sites appeared to be running properly Wednesday. In South Korea, several government sites were down late Tuesday and early Wednesday but many were back to normal by Wednesday afternoon. "There is a connection between what is going on here in the states and what is going on in [South] Korea," said Richard Howard, director of intelligence at VeriSign's iDefense cyber-security unit.

North Korea turned more antagonistic after the illness of dictator Kim Jong Il last August and September. The country had done little to prepare for a successor, and Mr. Kim's illness triggered an internal shuffle that apparently raised the influence of hard-line military figures.

At the White House, spokesman Nicholas Shapiro said the attacks over the weekend "had absolutely no effect on the White House's day-to-day operations." The only effect, he said, was that some Internet users in Asia may not have been able to access the White House's Web site for a time.

President Barack Obama has made bolstering cyber-security a priority. He said in May he would create a new White House cyber-security post, though it hasn't yet been staffed. People familiar with the process say the White House has had difficulty finding someone to take the job.

Defense officials confirmed Pentagon networks were struck but said the intrusions were detected quickly and did no real damage. Adm. Mike Mullen, the nation's top military officer, said Pentagon networks are under near-constant attack. "I grow increasingly concerned about the cyber-world and the attacks," he said.

James Lewis, a cyber-security specialist at the Center for Strategic and International Studies, said of the attack, "It's really a test of which U.S. agencies are ready and which aren't."

The New York Stock Exchange's parent company, NYSE Euronext, announced at 12:35 p.m. Wednesday that its Web site, but not its trading systems, had been targeted. Exchange officials weren't aware of the attack until notified by the government on Tuesday, said a person familiar with the events. An NYSE spokesman said the exchange's systems detected zero impact either on the Web site or on the separate trading operations. An official of Nasdaq said there wasn't any impact on its business.

Those responsible used a method similar to attacks in recent years on the governments of Estonia and Georgia, called a "distributed denial of service" attack. It is a maneuver in which many computers act in concert to overwhelm Web sites.

The cyberattacks came as Washington's point man on North Korea sanctions, Ambassador Philip Goldberg, concluded a weeklong trip to China and Malaysia aimed at tightening the financial screws on Pyongyang. Last week, the Obama administration announced sanctions on two North Korea-linked arms companies. The U.S. Treasury last month listed 17 North Korean banks and businesses that it is seeking to constrict financially.

Mr. Obama will meet with leaders from the region this weekend. They will discuss the economic crisis, including a plan to replenish the Inter-American Development Bank, a Washington-based pillar of clout that has suffered losses from the financial crisis.

Meanwhile, China is rapidly increasing its lending in Latin America as it pursues not only long-term access to commodities like soybeans and iron ore, but also an alternative to investing in United States Treasury notes.

One of China’s new deals in Latin America, the $10 billion arrangement with Argentina, would allow Argentina reliable access to Chinese currency to help pay for imports from China. It may also help lead the way to China’s currency to eventually be used as an alternate reserve currency. The deal follows similar ones China has struck with countries like South Korea, Indonesia and Belarus.

As the financial crisis began to whipsaw international markets last year, the Federal Reserve made its own currency arrangements with central banks around the world, allocating $30 billion each to Brazil and Mexico. (Brazil has opted not to tap it for now.) But smaller economies in the region, including Argentina, which has been trying to dispel doubts about its ability to meet its international debt payments, were left out of those agreements.

Details of the Chinese deal with Argentina are still being ironed out, but an official at Argentina’s central bank said it would allow Argentina to avoid using scarce dollars for all its international transactions. The takeover of billions of dollars in private pension funds, among other moves, led Argentines to pull the equivalent of nearly $23 billion, much of it in dollars, out of the country last year.

China is also seizing opportunities in Latin America when traditional lenders over which the United States holds some sway, like the Inter-American Development Bank, are pushing up against their limits.

Just one of China’s planned loans, the $10 billion for Brazil’s national oil company, is almost as much as the $11.2 billion in all approved financing by the Inter-American Bank in 2008. Brazil is expected to use the loan for offshore exploration, while agreeing to export as much as 100,000 barrels of oil a day to China, according to the oil company.

The Inter-American bank, in which the United States has de facto veto power in some matters, is trying to triple its capital and increase lending to $18 billion this year. But the replenishment involves delicate negotiations among member nations, made all the more difficult after the bank lost almost $1 billion last year. China will also have a role in these talks, having become a member of the bank this year.

In February, China’s vice president, Xi Jinping, traveled to Caracas to meet with President Hugo Chávez. The two men announced that a Chinese-backed development fund based here would grow to $12 billion from $6 billion, giving Venezuela access to hard currency while agreeing to increase oil shipments to China to one million barrels a day from a level of about 380,000 barrels

Mr. Chávez’s government contends the Chinese aid differs from other multilateral loans because it comes without strings attached, like scrutiny of internal finances. But the Chinese fund has generated criticism among his opponents, who view it as an affront to Venezuela’s sovereignty. “The fund is a swindle to the nation,” said Luis Díaz, a lawmaker who claims that China locked in low prices for the oil Venezuela is using as repayment.

“This is China playing the long game,” said Gregory Chin, a political scientist at York University in Toronto. “If this ultimately translates into political influence, then that is how the game is played.”

Other charities resemble multinational conglomerates. The Mostazafan & Jambazan Foundation (Foundation for the Oppressed and War Invalids) is the second-largest commercial enterprise in the country, behind the state-owned National Iranian Oil Co. Until recently it was run by a man named Mohsen Rafiqdoost. The son of a vegetable-and-fruit merchant at the Tehran bazaar, Rafiqdoost got his big break in 1979, when he was chosen to drive Ayatollah Khomeini from the airport after his triumphal return from exile in Paris.

Khomeini made him Minister of the Revolutionary Guards to quash internal dissent and smuggle in weapons for the Iran-Iraq war. In 1989, when Rafsanjani became president, Rafiqdoost gained control of the Mostazafan Foundation, which employs up to 400,000 workers and has assets that in all probability exceed $10 billion. Among its holdings: the former Hyatt and Hilton hotels in Tehran; the highly successful Zam-Zam soft drink company (once Pepsi); an international shipping line; companies producing oil products and cement; swaths of farmland and urban real estate.

A picture emerges from one Iranian businessman who used to handle the foreign trade deals for one of the big foundations. Organizations like the Mostazafan serve as giant cash boxes, he says, to pay off supporters of the mullahs, whether they're thousands of peasants bused in to attend religious demonstrations in Tehran or Hezbollah thugs who beat up students. And, not least, the foundations serve as cash cows for their managers.

Today Rafiqdoost heads up the Noor Foundation, which owns apartment blocks and makes an estimated $200 million importing pharmaceuticals, sugar and construction materials. He is quick to downplay his personal wealth. "I am just a normal person, with normal wealth," he says. Then, striking a Napoleonic pose, he adds: "But if Islam is threatened, I will become big again."