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'Shame Games' Put India Further Behind China

Barring any more disasters, the Commonwealth Games will open in New Delhi on schedule after all. The fact that the games won’t be delayed or cancelled is a victory for India’s beleaguered Prime Minister Manmohan Singh. Still, the games have already proved to be a disaster for the country and even if the rest of the games go off without a hitch, the images of crumbling infrastructure and filthy conditions will be hard to shake. The “Shame Games,” as an Indian magazine has dubbed them, will just reinforce the idea that corruption and mismanagement prevent India from matching the achievements of China.

American readers might be puzzled, asking who knows or cares about a second-tier event like the Commonwealth Games. Indians do care, though, and they long ago pointed to Delhi 2010 as India Shining’s answer to China’s success in staging the 2008 Olympics. This would be an event showing how India had overcome its corruption and mismanagement demons. The current failure therefore is about more than just whether some athletes don’t show up because of reports there’s poop on the walls in the living quarters. Here’s what Economic Times of India columnist Sudeshna Sen writes: “The disaster is economic and political. A setback to the country’s economic future , its geopolitical standing, its clout in places like UN and G20, et al. I don’t care what the Sensex is doing — we’re heading straight into Christmas bonus time when international traders need to spice up their earnings — the games disaster is going to make life very, very difficult for any politician, businessman, corporate, investor or diplomat in the future. Every single overseas investor who is being wooed for trillions of dollars to invest in India’s infrastructure will think thrice. Forget China and the Asian Games. Dear everyone, India is no longer considered in the same league as China, whatever we may wish to think.”

But China has plenty of corruption problems, too. And there’s no shortage of inept Chinese officials. So why does China succeed where India fails? Here’s one theory. In China, which executes more people than any other country, high level officials who screw up badly may face the death penalty if the country becomes an international laughing stock because of their actions. Consider the former head of the State Food and Drug Administration, Zheng Xiaoyu, executed in 2007 after a series of Made-in-China scares involving tainted food and drugs. Two people implicated in the tainted milk scandal, which left several children dead, thousands of others sickened and countries around the world shunning Chinese dairy products, were executed last November.

India, to its credit, rarely imposes the death penalty. But it rarely imposes any other penalties, either. The notoriously slow Indian legal system, where cases can languish for decades, makes it easy for corrupt officials to go ahead without any fear of punishment.


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China Has Foreign-Worker Problem, Too

While the U.S. and India squabble over H-1B and L-1 work visas for employees of Indian outsourcing companies, there’s a debate about foreign workers going on in China, too. Wait - China? The country with the world’s largest population and a bottomless pool of cheap labor? That China? Hard as it might be for Americans to believe, China has a growing illegal alien problem, too. According to Thursday’s South China Morning Post, officials in southern China’s Guangdong province are concerned about undocumented workers from neighboring countries. The SCMP cites the Nanfang Daily, the official newspaper of the Guangdong government, reporting that the province is about to impose new regulations on foreign workers. “With a huge workforce and strict immigration policies, the mainland is still closed to overseas labourers,” the SCMP reporter, Ivan Zhai, writes. However, local companies are looking for foreign workers thanks, in part, to higher costs associated with a new labor law that calls for better pay and benefits for Chinese workers. “More and more manufacturers are likely to employ illegal labourers from Southeast Asian countries such as Vietnam and Cambodia. The reason is they that they will work for less pay and endure worse working conditions.”

For years, Guangdong officials have talked about the need to upgrade the local economy and shift away from reliance on low-wage labor. That’s happening, as companies like Foxconn (which manufactures for Apple and many others) are moving away from Guangdong. Foxconn is hiring as many as 300,000 workers at a new plant in central China. Not everybody can afford to pick up and move, though. For those companies stuck in Guangdong, hiring low-wage foreign workers is an attractive option, whether local officials like it or not.


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Japan Can't Afford Fight with China

I was in Beijing late last month, shortly after news broke that China had passed Japan as the world’s second-largest economy. The official line in the Chinese media: No gloating over passing China’s longtime rival. For instance, when Premier Wen Jiabao met with Japanese foreign minister Katsuya Okada in Beijing on August 29, leaders about ways the two countries could work together. Wen talked about enhancing bilateral cooperation and Okada was upbeat, too. “During the meeting on Sunday, Okada said the future of China and Japan was becoming increasingly integrated,” the official English-language China Daily reported. ” ‘Not only do Japanese companies position it (China) as a manufacturing base, more importantly, they regard it as a very important consumer market,’ Okada said.” Reflecting Beijing’s don’t-kick-them-when-they’re-down approach, on August 31 the China Daily followed up with this headline: “China, Japan can herald ‘golden age for Asia’

The era of good feeling didn’t last long. Less than a month later, Sino-Japanese relations are at their worst point in years. Beijing has cut senior-level government contacts and Japan’s top spokesman has warned against “extreme” nationalist sentiment. The two sides are fighting over Japan’s detention of a Chinese shipping-boat captain following a Sept. 7 collision near islands in the South China Sea administered by Japan but also claimed by China and Taiwan. My colleagues at Bloomberg News report investors in Tokyo are nervous the fight could hurt Japanese companies that do business in China. “There’s a possibility Japan would try to implement sanctions on China, which would be bad for related companies in Japan,” Daiwa Securities Capital Markets general manager Kazuhiro Takahashi told Bloomberg.

I don’t see that happening. Japanese Prime Minister Naoto Kan’s government last week declared war on currency traders, intervening in the markets to strengthen the yen for the first time in six years. That yen battle is far from over, and the fortunes of Japanese exporters like Sony, Honda and Toyota are up in the air as it plays out. The last thing the Japanese need now is to open a second front and invite Chinese retaliation against Japanese exporters. The Chinese captain is currently scheduled to be in detention until Sept. 29. Chances are, he’ll be on his way back to China soon after that.


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China Buys Gas-Tapping Technology

My colleague John Duce and I wrote in this week’s issue of Bloomberg Businessweek about China’s search for unconventional gas — gas trapped in coal deposits, for instance, or in shale. The country has huge potential for this kind of unconventional gas: China has as much as 30 trillion cubic meters of gas trapped in coal and shale, ten times more than the country’s conventional gas reserves. Getting access to all that unconventional gas isn’t easy, though, which is one reason state-owned PetroChina has invested in Australian company Arrow Energy, which specializes in extracting unconventional gas.

In June, China National Petroleum formed a joint venture with a Canadian company, Encana, to develop unconventional gas projects in Canada. As Worldwatch Research Fellows Saya Kitasei and Haibing Ma write, “the deal with Encana will give CNPC a chance to gain insight from an independent gas company that has some of the longest experience with applying hydraulic fracturing and horizontal drilling to extract gas from shale formations. In this model, one hand washes the other: major oil and gas companies gain access to the technology and expertise they need to develop unconventional gas, and smaller independent gas companies get access to the sizeable amounts of capital that many have needed in recent years.”

Now comes news that another state-owned company, CNOOC International, has agreed to pay $1.08 billion in cash for a one-third stake in a shale gas project in south Texas owned by Oklahoma City-based Chesapeake Energy. Like PetroChina’s Aussie deal, this Texas investment is not just about a short-term boost to supply from developing unconventional gas reserves overseas; it should also help the Chinese achieve their bigger goal, developing unconventional gas reserves at home.


View the original article here

China Buys Gas-Tapping Technology

My colleague John Duce and I wrote in this week’s issue of Bloomberg Businessweek about China’s search for unconventional gas — gas trapped in coal deposits, for instance, or in shale. The country has huge potential for this kind of unconventional gas: China has as much as 30 trillion cubic meters of gas trapped in coal and shale, ten times more than the country’s conventional gas reserves. Getting access to all that unconventional gas isn’t easy, though, which is one reason state-owned PetroChina has invested in Australian company Arrow Energy, which specializes in extracting unconventional gas.

In June, China National Petroleum formed a joint venture with a Canadian company, Encana, to develop unconventional gas projects in Canada. As Worldwatch Research Fellows Saya Kitasei and Haibing Ma write, “the deal with Encana will give CNPC a chance to gain insight from an independent gas company that has some of the longest experience with applying hydraulic fracturing and horizontal drilling to extract gas from shale formations. In this model, one hand washes the other: major oil and gas companies gain access to the technology and expertise they need to develop unconventional gas, and smaller independent gas companies get access to the sizeable amounts of capital that many have needed in recent years.”

Now comes news that another state-owned company, CNOOC International, has agreed to pay $1.08 billion in cash for a one-third stake in a shale gas project in south Texas owned by Oklahoma City-based Chesapeake Energy. Like PetroChina’s Aussie deal, this Texas investment is not just about a short-term boost to supply from developing unconventional gas reserves overseas; it should also help the Chinese achieve their bigger goal, developing unconventional gas reserves at home.


View the original article here