THE LATEST 'GREAT GAME' INVOLVES INDIAN OCEAN

A Sri Lankan port being built by China points to Beijing's jockeying with India for regional influence.

Gavin Rabinowitz

Los Angeles Times, August 31, 2008

HAMBANTOTA, SRI LANKA — This battered harbor town on Sri Lanka's southern tip, with its scrawny men selling even scrawnier fish, seems an unlikely focus for an emerging international competition over the energy supply routes that fuel much of the global economy.

An impoverished place still recovering from the devastation of the 2004 Indian Ocean tsunami, Hambantota has a desolate air, a sense of nowhereness, punctuated by the realization that looking south over the expanse of ocean, the next landfall is Antarctica.

But just over the horizon runs one of the world's great trade arteries, the shipping lanes where thousands of vessels carry oil from the Middle East and raw materials to Asia, returning with television sets, toys and sneakers for European consumers.

These tankers provide 80% of China's oil and 65% of India's -- fuel desperately needed for the two countries' rapidly growing economies. Japan is almost totally dependent on energy supplies shipped through the Indian Ocean.Any disruption -- from terrorism, piracy, natural disaster or war -- could have devastating effects on these countries and, in an increasingly interdependent world, send ripples across the globe. When an unidentified ship attacked a Japanese oil tanker traveling through the Indian Ocean from South Korea to Saudi Arabia in April, the news sent oil prices to record highs.

For decades the world relied on the U.S. Navy to protect this sea lane. But as India and China gain economic heft, they are moving to expand their control of the waterway, sparking a new, and potentially dangerous, rivalry between Asia's emerging giants.

China has given massive aid to Indian Ocean nations, signing friendship pacts, building ports in Pakistan, Bangladesh and Sri Lanka, and reportedly setting up a listening post on one of Myanmar's islands near the strategic Strait of Malacca.

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CHINA UNLIKELY TO LOOSEN ITS GRIP IN WEST

Experts Anticipate Unyielding Response to Latest Fatal Attacks in Xinjiang Province

Jill Drew

The Washington Post, August 30, 2008

Violent outbursts are continuing in the Xinjiang region of western China, with the latest resulting in the deaths of two policemen who were attacked Wednesday while searching a cornfield for a woman they believe is involved in a separatist cell.

State media reported Saturday morning that police found the alleged assailants and shot six of them dead after they tried to defend themselves with knives, wounding two security officials.

The attack and ensuing capture of suspects was the fourth incident this month in the area, bringing the total dead to 39 despite intense paramilitary police patrols since before Beijing's Summer Olympic Games.

In both Xinjiang and the nearby Tibetan regions, China has deployed thousands of security personnel in recent months to keep the peace and root out troublemakers. Now the government might consider keeping those forces in the regions indefinitely, experts said, because tensions remain high. Required affirmations of political loyalty and surveillance of telephone calls, Internet use and physical movement are also expected to continue.

"Three days ago, I called my mother back in Tibet," said Tenzin Losel, who fled Tibet for India in 1997 and had not spoken with his parents since this spring's riot in Lhasa and the ensuing wave of anti-government protests that swept the Tibetan plateau. He said he did not want his call to get them in trouble with police, but he wanted to hear his mother's voice. "She said hello and that she was okay. Then she asked if I was okay and after I said yes, she just put down the phone. I felt in that moment the tense division in Tibet."

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INDIA'S ECONOMY GROWS 7.9%, SLOWEST PACE SINCE 2004

Cherian Thomas

Bloomberg, August 29, 2008

(Bloomberg) -- India's economy grew at the slowest pace since 2004 last quarter as the fastest inflation in a decade and increased borrowing costs damped consumer spending. Asia's third-largest economy expanded 7.9 percent in the three months to June 30 from a year earlier, following an 8.8 percent gain in the previous quarter, the Central Statistical Organisation said in a statement in New Delhi today. Analysts expected gross domestic product to increase 8 percent. Inflation has almost tripled this year to 12.4 percent amid higher fuel and food prices, forcing the central bank to raise interest rates three times since June. While growth is almost double the average pace since India's independence in 1947, it is slowing along with the other so-called BRIC economies of Russia, Brazil and China.

"We don't expect India's slowdown to be too dramatic,'' said Philip Wyatt, a senior economist at UBS AG in Hong Kong. "There will be a gradual slowdown in GDP growth throughout this year - the industrial side of GDP is already slowing.''

India's benchmark Sensitive index, which has declined by a third this year, rose 3.4 percent to 14522.82 at noon on the Bombay Stock Exchange, while the yield on the key 10-year bond fell 11 basis points to 8.66 percent. The rupee was little changed at 43.755 against the U.S. dollar.

China, Russia

Finance Minister Palaniappan Chidambaram said today that growth for the year to March 31 will be close to 8 percent. India risks being overtaken by Russia as the world's fastest expanding major economy after China this year. Russia's economy may grow 7.1 percent in 2008, surpassing India's 7 percent expansion this year, according to World Bank estimates.

The World Bank expects the U.S. economy to expand 1.1 percent this year, half of 2007's pace. The U.S. economy grew at a faster-than-expected 3.3 percent annual rate in the second quarter, helped by a surge in exports that will probably wane as Europe and Japan head toward recessions. India's expansion slowed in the second quarter as construction growth weakened to 11.4 percent from 12.6 percent in the previous three months and manufacturing gained 5.6 percent compared with 5.8 percent in the first quarter, today's report said.

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PEACEFUL PROTESTS IN KASHMIR ALTER EQUATION FOR INDIA
Tough Response Criticized as Outmoded

Emily Wax

The Washington Post, August 28, 2008

SRINAGAR, India -- Inside dozens of cramped kitchens in this Kashmiri city on Saturday, mothers and daughters prepared to make packets of rice for the hundreds of thousands expected at a sit-in two days later. Outside, their sons and brothers collected change from motorists to buy water and juice.

Drumbeats echoed through the Kashmir Valley as college students chanted "Azadi," or freedom. In middle-class neighborhoods, Internet-savvy students blogged about their views and posted videos of the preparations on YouTube.

But early Sunday, Indian security forces blanketed the region, preventing demonstrators from reaching the center of Srinagar, summer capital of Kashmir. Authorities announced an indefinite curfew, blocked Internet access and arrested three prominent Muslim separatist leaders. At least 15 journalists were beaten.

Despite the government's use of force, many Muslims in Indian-controlled Kashmir seem determined to find peaceful ways to voice their separatist aspirations. The slogans of the fighting in the 1990s, such as "I'm going to Pakistan to get an AK-47," have disappeared as the nonviolent movement flourishes, especially among the young.

"For the young generation, it's our moment now," said Malik Sajad, a 20-year-old political cartoonist for the Greater Kashmir newspaper who was raised during the war. "Nobody here saw a childhood. We were always kept indoors. But we don't believe that the solution is in the gun. Now we want to show the world that Kashmiris deserve peace."

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A JIHAD GROWS IN KASHMIR

Panjak Mishra

The New York Times, August 27, 2008

For more than a week now, hundreds of thousands of Muslims have filled the streets of Srinagar, the capital of Indian-ruled Kashmir, shouting “azadi” (freedom) and raising the green flag of Islam. These demonstrations, the largest in nearly two decades, remind many of us why in 2000 President Bill Clinton described Kashmir, the Himalayan region claimed by both India and Pakistan, as “the most dangerous place on earth.”

Mr. Clinton sounded a bit hyperbolic back then. Dangerous, you wanted to ask, to whom? Though more than a decade old, the anti-Indian insurgency in Kashmir, which Pakistan’s rogue intelligence agency had infiltrated with jihadi terrorists, was not much known outside South Asia. But then the Clinton administration had found itself compelled to intervene in 1999 when India and Pakistan fought a limited but brutal war near the so-called line of control that divides Indian Kashmir from the Pakistani-held portion of the formerly independent state. Pakistan’s withdrawal of its soldiers from high peaks in Indian Kashmir set off the series of destabilizing events that culminated in Pervez Musharraf assuming power in a military coup.

After 9/11, Mr. Musharraf quickly became the Bush administration’s ally. Seen through the fog of the “war on terror” and the Indian government’s own cynical propaganda, the problem in Kashmir seemed entirely to do with jihadist terrorists. President Musharraf could even claim credit for fighting extremism by reducing his intelligence service’s commitment to jihad in Kashmir — indeed, he did help bring down the level of violence, which has claimed an estimated 80,000 lives.

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FRACTIOUS COALITION IN PAKISTAN BREAKS APART

Jane Perlez

The New York Times, August 26, 2008

ISLAMABAD, Pakistan — Pakistan’s fledgling civilian government collapsed on Monday, as the leaders of the main two coalition parties turned their sights on each other, only a week after banding together to force the resignation of President Pervez Musharraf.

The coalition’s failure, after just five months of governing Pakistan, worsened the leadership crisis in this nuclear-armed nation at a time when it faces a serious threat from the growing strength of the Taliban in the northwestern parts of its territory.

Now the deepening rivalry between the party leaders — Asif Ali Zardari, the widower of the slain former prime minister Benazir Bhutto, and Nawaz Sharif, a former prime minister himself — will play out in the coming elections for president.

Mr. Zardari, leader of the larger Pakistan Peoples Party, decided last week to run for the office — one of several reasons Mr. Sharif, who leads the Pakistan Muslim League-N, gave for leaving the coalition and naming his own candidate. Mr. Sharif said that Mr. Zardari, relatively new to day-to-day politics though increasingly influential inside Pakistan and with Washington, had broken several promises that made it impossible for him to stay in the government.

“We have been forced to leave the coalition,” Mr. Sharif said in a news conference here in the capital. “We joined the coalition with full sincerity for the restoration of democracy. Unfortunately, all the promises were not honored.”

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AFTER GLOW OF GAMES, WHAT NEXT FOR CHINA?

Jim Yardley

International Herald Tribune, August 25, 2008

BEIJING — The elaborate closing ceremony that ended the Olympic Games on Sunday also ended nearly a decade in which the ruling Communist Party had made the Games an organizing principle in national life. Almost nothing has superseded the Olympics as a political priority in China.

For Chinese leaders, all that effort paid off. The Games were seen as an unparalleled success by most Chinese — a record medal count inspired nationwide excitement, and Beijing impressed foreign visitors with its hospitality and efficiency. And while the government’s uncompromising suppression of dissent drew criticism, China also demonstrated to a global audience that it is a rising economic and political power.

But a new, post-Olympic era has begun. The question now is whether a deepening self-confidence arising from the Olympic experience will lead China to further its engagement with the world and pursue deeper political reform, or whether the success of the Games and the muted Western response to repression will convince leaders that their current model is working.

“China was eager to present something that shows it is a new power that has its own might,” said Shen Dingli, a professor at Fudan University in Shanghai. “It has problems, but it is able to manage them. It has weaknesses in its institutions, but also strengths in those same institutions.”

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CHILD MALNUTRITION IS AN OLD STAIN ON A NEW INDIA

Half of young Indians are malnourished. In a nation seen as a rising power, combating the problem 'has not been a policy priority . . . for the last 40 years,' a U.N. expert says.

Henry Chu

Los Angeles Times, August 24, 2008

SARAIYA, INDIA — Sitting in the basket of a hanging scale, 20-month-old Deep Kumar epitomizes the silent but monumental crisis gripping this country: The needle stops at 14 pounds.

A healthy child his age ought to weigh nearly twice as much. But very little about Deep is healthy. Whereas a normal toddler would run around, the boy seems to struggle to keep his stunted frame sitting upright. His limbs are pitifully thin, the bones within as fragile as glass.

These are classic signs of severe malnutrition, and they are branded on the wasted bodies of millions of youngsters across India.

Astonishingly, an estimated 40% of all the world's severely malnourished children younger than 5 live in this country, a dark stain on the record of a nation that touts its high rate of economic growth and fancies itself a rising power.

Soaring food prices and ineffectual government threaten to push that figure even higher. Officials are beginning to wake up to the magnitude of the emergency, as experts warn of grave consequences for the future of India's economic boom if the state fails to improve the well-being of its youngest citizens.

Already, the proportion of malnourished children is several times greater than in China, Asia's other developing giant, and double the rate found in most countries of sub-Saharan Africa.

"This is a stunning fact," said Abhijit Banerjee, a professor of economics at the Massachusetts Institute of Technology who has studied the problem.

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AFTER MUSHARRAF, U.S. STRUGGLES TO FIND NEW PAKISTAN ALLY AGAINST TALIBAN

Jane Perlez

The New York Times, August 23, 2008

ISLAMABAD, Pakistan — Now that Washington’s close friend, President Pervez Musharraf, is gone, the question is this: who among the array of characters in the political firmament here will America turn to in the messy fight against an emboldened Taliban?

Mr. Musharraf, president and army chief for almost all of his nine-year tenure before he resigned Monday under threat of impeachment, served as a convenient one-stop shopping window.

The Bush administration relied on him for military support to suppress the Taliban in the tribal regions, and for intelligence in rounding up people suspected of belonging to Al Qaeda. In the end, it did not reap much of what it wanted. But Mr. Musharraf, the seemingly amenable autocrat, offered Washington a sense of leverage.

With Mr. Musharraf out of power, recent visitors to the United States Embassy here say American officials have been at a loss — one used the word “struggling” — to figure out who America should throw its weight behind.

On Friday, the country’s biggest party, the Pakistan Peoples Party, said it was nominating its leader, Asif Ali Zardari, for president, a post he may end up winning in an electoral college vote scheduled for Sept. 6.

That could make Mr. Zardari America’s default ally, though the next president’s full range of powers, and his commitment and ability to fight the Taliban insurgency, as Washington would like, are far from clear.

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ASIA: INDIAN TIGER CHANGES STRIPES TO CHASE THE DRAGON
· Chinese-style 10% growth target, says planning chief
· Prediction that hardware will outpace software

Randeep Ramesh

The Guardian, August 22, 2008

The Indian economy will expand at 8% a year - shrugging off the credit crunch and high oil prices - as it is transformed into an industrial powerhouse to rival China, the government's top policy tsar said yesterday. He predicted that Chinese-style 10% annual growth was "achievable". Montek Singh Ahluwalia, deputy chief of India's planning commission, said the government would be "targeting 9% growth, getting up to 10%. It may look ambitious with the global economic slowdown. But in the medium term, it is achievable."

India's central bank expects growth in the year ending 2009 to slow to 8% - down from 9.1% in the previous 12 months.

The commission has signalled a huge shift in the economy - forecasting that in the next five years 58m new jobs will be created but none of these would be in the vast, unproductive farm sector. In the past five years farming employment increased by 9 million while India's rice production remained less than half the world average of four tonnes a hectare.

Economists have long argued that for India to mimic China's "long boom", the country would have to see industry fuel growth. In China, this led to millions of people leaving the land to work in factories. But this process has not happened in India, where growth has been driven by capital-intensive sectors such as information technology. Although hugely successful, Indian software companies employ only 1.5 million people - a mere drop in the labour pool of 470 million.

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“THERE IS NO INDICATION OF AN INVESTMENT SLOWDOWN YET”
Q&A : ARVIND VIRMANI

Siddharth Zarabi & Rituparna Bhuyan

Business Standard, New Delhi August 21, 2008

In the second and concluding part of an interview, Arvind Virmani, chief economic adviser, Ministry of Finance, tells Siddharth Zarabi and Rituparna Bhuyan that the monetary policy has to be directed more strongly towards tackling inflation. Excerpts:

Do you think there is a trade-off between growth and inflation?

Traditionally, the Indian political system does not tolerate inflation above a certain level. We have crossed that point. Therefore, monetary instruments have to be directed more strongly at the inflation issue.

Does that mean we accept whatever happens on the output side? The answer is both yes and no. No in the sense that we can use one more instrument, which was dormant in the past, and that is reforms.

We are moving towards a revised wholesale price index (WPI). What is your view?

Even more important than that is the consumer price index (CPI). We need an aggregate CPI for the very reasons that I told you. The gap between the United States’ CPI and the PPI (purchasing power index) is huge now. It may not be as large in India but I am sure there is a gap.

The only way we will be able to prove it is by looking at what we introduced in the previous economic survey — the private consumption price deflator. I expect that it will be much lower. My rough guess will be about 50 per cent higher than last year. It was close to 4 per cent last year, so it may be 6 or 7 per cent this year. The implication of what I am saying about the PPI is that please do not look only at the WPI when talking about inflation or forming expectations on inflation.

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First Part: “This Inflation is Like 70s’ Oil Shock”, August 20, 2009

DON’T LOOSEN NUCLEAR RULES FOR INDIA

Edward J. Markey and Ellen O. Tauscher

The New York Times, August 20, 2008

In the next day or so, an obscure organization will meet to decide the fate of an Indian nuclear deal that threatens to rapidly accelerate New Delhi’s arms race with Pakistan — a rivalry made all the more precarious by the resignation on Tuesday of the Pakistani president, Pervez Musharraf.

Nonetheless, President Bush is lobbying the Nuclear Suppliers Group, which governs international nuclear commerce, to waive its most crucial rules in order to allow the trade of reactors, fuel and technology to India. If the president gets his way, the Nuclear Nonproliferation Treaty — for 50 years, the bulwark against the spread of nuclear weapons — would be shredded and India’s yearly nuclear weapons production capability would likely increase from 7 bombs to 40 or 50.

India’s nuclear history is checkered at best, and New Delhi has been denied access to the international nuclear market for three decades. The reasons are well known: the country has never signed the nonproliferation treaty or the Comprehensive Nuclear Test Ban Treaty, it misused civilian nuclear technology to produce its first nuclear weapon in 1974, and it continues to manufacture nuclear weapons to this day.

Paradoxically, the Nuclear Suppliers Group was formed in direct response to India’s illegal 1974 nuclear test. Its central purpose is to ensure that no other country exploits foreign nuclear energy assistance to make a bomb, as India did. If the group accedes to President Bush’s dangerous request, countries such as Iran and North Korea would certainly use the precedent to their advantage.

The Indian nuclear deal threatens international security not only by undermining our nuclear rules, but also by expanding India’s nuclear weapons program. That’s because every pound of uranium that India is allowed to import for its power reactors frees up a pound of uranium for its bomb program.

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IN MUSHARRAF'S WAKE, FACTIONS LEFT TO VIE FOR POWER

Jane Perlez

International Herald Tribune, August 19, 2008

ISLAMABAD, Pakistan: Facing imminent impeachment charges, President Pervez Musharraf announced his resignation on Monday, after months of belated recognition by American officials that he had become a waning asset in the campaign against terrorism.

The decision removes from Pakistan's political stage the leader who for nearly nine years served as one of the United States' most important - and ultimately unreliable -allies. And it now leaves American officials to deal with a new, elected coalition that has so far proven itself to be unwilling or incapable of confronting an expanding Taliban insurgency determined to topple the government.

"Whether I win or lose the impeachment, the nation will lose," Musharraf said, explaining his decision in an emotional televised speech lasting more than an hour. He will stay in Pakistan and will not be put on trial, government officials said.

The question of who will succeed Musharraf is certain to unleash intense wrangling between the two rival political parties who form the governing coalition and to add a new layer of turbulence to an already unstable nuclear-armed nation of 165 million people.

"We've said for years that Musharraf is our best bet, and my fear is that we are about to discover how true that was," one senior Bush administration official said, acknowledging that the United States had stuck with Musharraf for too long and developed few other relationships in Pakistan to fall back on.

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MUSHARRAF TO RESIGN AS PRESIDENT OF PAKISTAN

Candace Rondeaux

The Washington Post, August 18, 2008

ISLAMABAD, Aug. 18 -- Bowing to pressure from Pakistan's newly-elected civilian government, Pakistani President Pervez Musharraf, once a top U.S. ally, said Monday that he will resign from office immediately, effectively ending nearly nine years of military rule in the country under his leadership.

Musharraf announced his decision to step down in a nationally televised public address 10 days after leaders of Pakistan's two ruling coalition parties called for his impeachment. Demand for his resignation became increasingly vocal last week after Pakistan's four provincial assemblies voted overwhelmingly for his ouster.

In the nearly hour-long address, Musharraf struck a defiant and emotional tone, saying that his political opponents had opted for the politics of confrontation over reconciliation. But he said that he is stepping down in the interest of maintaining stability in the country.

"I am leaving with the satisfaction that whatever I could do for this country I did it with integrity," Musharraf said. "I am a human too. I could have made mistakes but I believe that the people will forgive me."

Musharraf's resignation Monday signaled the end of a long and important relationship with the U.S. Musharraf was one of the first Muslim leaders to declare allegiance to the U.S. after the Sept. 11, 2001 attacks. With his support the U.S. was allowed to use several military bases in Pakistan while Pakistani army troops were deployed to pursue Taliban and al-Qaeda insurgents sheltering in the country's rugged tribal areas near the border of Afghanistan. It was a tremendously risky stance for the leader of one of the world's most populous and politically divided Muslim nations -- one that provoked ire from al-Qaeda leaders in particular. But the alliance earned Pakistan important political dividends and more than $10 billion in U.S. aid, transforming the impoverished country from a political pariah to a regional economic powerhouse.

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SHINE OFF INDIA'S ECONOMY AS GLOOMY DATA PILES UP

AFP, August 17, 2008

NEW DELHI (AFP) — Until a few months ago, the most popular buzz phrase for India was "economic miracle", with the nation appearing impervious to the financial turmoil engulfing the developed world.

But now the "India story" is losing traction, with inflation at 13-year highs and economic expansion slowing, prompting an exit by foreign investors as gloomy warnings pile up.

"A number of factors inimical to growth have intensified," the government's Economic Advisory Council said last week, citing a world economy hit by the "twin onslaught" of the US subprime mortgage crisis and an oil price surge.

No country can "expect to emerge unscathed," it cautioned.

Inflation, currently at 12.44 percent, will "remain in double digits through 2008" as a result of the surge in oil and other commodity prices, said Goldman Sachs economist Tushar Poddar, who sees more monetary tightening to tame prices, which will brake domestic growth further.

Some economists forecast inflation, which has nearly tripled from a year ago, could hit at least 15 percent.

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CHINA'S ECONOMY SLOWS ON WEAKER PRODUCTION, OLYMPICS CLOSURES

Kevin Hamlin

Bloomberg, August 16, 2008

China's growth is cooling and may spur the government to ease lending restrictions, provide more export-tax rebates and stall yuan appreciation, analysts said after economic reports this week.

Industrial production grew in July at the weakest pace in 16 months amid faltering orders for Chinese exports. Consumer prices rose the least in 10 months, giving policy makers room to boost the economy without fueling inflation.

The slowdown in China, which powered almost 30 percent of the global expansion last year, may be exacerbated by factory closures aimed at cutting pollution during the Beijing Olympics, according to Goldman Sachs Group Inc. The central bank yesterday said it would "fine-tune'' monetary policy as weaker overseas demand for the nation's goods poses risks to the economy.

"Concerns over China's export health will translate into a complete reversal of the current tightening policy," said Donald Straszheim, vice chairman of Newport Beach, California- based Roth Capital Partners. "Maintaining economic growth is now number one.''

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INDIA-PAKISTAN RELATIONS IN FREE FALL

M K Bhadrakumar

Asia Times, August 15, 2008

Eleven months ago, the Indian army announced it had plans to open the 72-kilometer long Siachen glacier to regular civilian expeditions. On September 13, 2007, an Indian army spokesman claimed the move to make Kashmir's treacherous Siachen glacier a tourist attraction drew inspiration from Prime Minister Manmohan Singh's call in 2005 to turn the glacier into a "peace mountain".

Things were looking up in India-Pakistan relations. Kashmir seemed edging closer to a resolution than at any time before. But it all seems light years away now.

Within the past few weeks, things have begun unraveling. A local controversy over the donation of government land in Jammu and Kashmir (J&K) to a Hindu shrine snowballed into protests in the predominantly Muslim state. The government, which was taken aback by the fury of the protests, retracted its decision. In turn, that led to a Hindu backlash and more violence followed, leading to tensions between Muslims and Hindus, forcing the authorities to introduce a curfew.

The agitation in the Kashmir Valley has assumed in the meanwhile an old, familiar anti-India overtone, as Muslim protesters resorted to pro-independence rallies, the biggest the valley has seen in the past two decades. In police firings, over two dozen lives have been lost, with scores injured, which triggered further protests, with large numbers of Muslims ignoring the curfew and taking to the streets.

In the capital of Srinagar, tens of thousands of people defied the curfew to bury a separatist leader who died in police fire on a huge crowd of Muslims protesting against an alleged blockade - "economic blockade" - of the road linking the valley to the rest of India via the Hindu-dominated southern regions of Kashmir.

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INDIA: WHAT ECONOMIC REFORM?

As Indian inflation rises, Prime Minister Singh has little time left to push privatizing state companies and other financial reforms

Nandini Lakshman

Business Week, August 14, 2008

Barely three weeks ago, there was a new buoyancy in New Delhi. The Congress-led coalition government had won a vote of confidence in Parliament in favor of the U.S.-India civilian nuclear deal (BusinessWeek.com, 07/22/08). To protest the controversial deal, the Communists, uneasy coalition partners with Congress since 2004, quit the government. Free of the Communists and fresh from its nuclear-deal triumph, the government, it appeared, was finally set to pick up the baton on economic reforms.

But many observers worry the government is about to squander this golden opportunity. Right after the vote, Prime Minister Manmohan Singh said he'd look at financial reforms and divestment, but since then his government has made just a single significant move: allowing select private players to manage public pension funds for the first time.

And events may be overtaking New Delhi's intentions. In July, Fitch downgraded India from stable to negative, and Standard & Poor's issued a warning that the country's sovereign credit-rating outlook may turn negative. On Aug. 4, Moody's also cautioned investors about a possible downgrade of India's credit rating. The culprit is inflation, now over 12%. India's public finances are feeling the pressure from high oil and fertilizer subsidies, hefty payouts for government employees—which will equal 2.4% of the country's $1 trillion gross domestic product—and a $15 billion farm debt forgiveness program whose efficacy has yet to be determined. "Higher oil prices and the lack of adequate fiscal policy reactions amidst high pent-up price pressures are putting the burden of macro-economic adjustment on the monetary authorities," wrote Moody's senior analyst Aninda Mitra in the report.

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U.S. ANALYST DEPICTS AL QAEDA AS SECURE IN PAKISTAN AND MORE POTENT THAN LAST YEAR

Mark Mazzetti

The New York Times, August 13, 2008

WASHINGTON — Al Qaeda’s success in forging close ties to Pakistani militant groups has given it an increasingly secure haven in the mountainous tribal areas of Pakistan, the American government’s senior terrorism analyst said Tuesday.

Al Qaeda is more capable of attacking inside the United States than it was last year, and its cadre of senior leaders has recruited and trained “dozens” of militants capable of blending into Western society to carry out attacks, the analyst said.

The remarks Tuesday by the intelligence analyst, Ted Gistaro, were the most comprehensive assessment of the Qaeda threat by an American official since the National Intelligence Estimate issued last summer, which concluded that Al Qaeda had largely rebuilt its haven in Pakistan’s tribal areas.

A year later, Mr. Gistaro said, the problem has only grown worse, in part because of a symbiotic relationship between Qaeda operatives and Pakistani militant groups based in the tribal areas.

“It is a stronger, more comfortable safe haven than it was for them a year ago,” said Mr. Gistaro, who supervises all intelligence reports on terrorism at the National Intelligence Council. He made his remarks in a speech here to the Washington Institute for Near East Policy.

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CHINA INFLATION COOLS, ALLOWING MORE GROWTH MEASURES

Kevin Hamlin and Nipa Piboontanasawat

Aug. 12 (Bloomberg) -- China's inflation cooled to the slowest pace in 10 months, giving the government more room to restrain the yuan's advance and bolster economic growth.

Consumer prices rose 6.3 percent in July from a year earlier as food costs eased, the statistics bureau said today, after a 7.1 percent gain in June. That was below the 6.5 percent median estimate of 17 economists surveyed by Bloomberg News.

The slowdown may encourage government policies aimed at sustaining growth in the world's fourth-biggest economy rather than fighting inflation. While policy makers have halted the yuan's appreciation and boosted tax rebates to help exporters, data yesterday showing the fastest producer-price inflation in 12 years underscores the risk that consumer prices will rebound.

“The headline number looks good but price pressures in the pipeline mean it's not all good news,'' said Kevin Lai, an economist at Daiwa Institute of Research in Hong Kong. “Round one is probably over, but it is still too early to claim a gold medal over inflation fighting.''

The yuan weakened 0.1 percent to 6.8626 against the dollar as of 2:56 p.m. in Shanghai. The CSI 300 Index fell 0.6 percent after sliding 5.2 percent yesterday on concern that producer- price gains will erode profits and prompt monetary tightening.

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NEW SPASM OF VIOLENCE IN WESTERN CHINA AS 11 DIE IN WAVE OF BOMBINGS

Jim Yardley

The New York Times, August 11, 2008

BEIJING — The violence in the western Chinese region of Xinjiang rose sharply Sunday morning with the deaths of a security guard and at least 10 suspects after a daring series of bombings that began with a predawn assault on a police station, the state news media reported.

The attacks, coinciding with the first weekend of the Beijing Olympics, occurred less than a week after what the Chinese authorities had described as China’s worst terrorist assault in recent memory, in the Xinjiang city of Kashgar. Last Monday, two Uighur Muslims rammed a truck into a group of paramilitary officers who were doing their morning exercises, then attacked with explosives and knives, the authorities say. Sixteen officers were killed and several more were wounded.

Xinhua, the country’s official news agency, described the suspects in Sunday’s attack as “terrorists,” though the authorities have not attributed the attack to any terrorist group. In recent weeks, the Chinese authorities have accused the East Turkestan Islamic Movement, or ETIM, of plotting terrorist attacks against the Olympics. The Chinese government and the United States State Department list the group as a terrorist organization, though some specialists on Xinjiang question its scope and potency. Some human rights groups have accused China of exaggerating the threat to justify its crackdown against Uighurs.

More recently, an obscure militant group, the Turkestan Islamic Party, released videos claiming responsibility for recent bus bombings in southwestern China and threatened to carry out attacks on the Olympics. Last week, IntelCenter, a private American group that monitors terrorism, concluded that this group was the same as ETIM.

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POLICE IN WESTERN CHINA KILL 5 SUSPECTED MILITANTS AFTER BOMBING ATTACK

Jim Yardley

The New York Times, August 10, 2008

BEIJING — Five people were killed early Sunday morning after a violent confrontation in western China’s tense Xinjiang region in which the police fired on assailants who had attacked a police station with homemade bombs, state media reported.

The violence, coinciding with the first weekend of the Beijing Olympics, comes amid a police crackdown in Xinjiang. The authorities say Uighur militants in the region pose a potential security threat to the Games. Last week the authorities said two Uighur militants attacked a police station in the Xinjiang city of Kashgar, killing 16 paramilitary police and wounding 16 others.

The blasts that happened Sunday took place in Kuqa County in a succession of explosions between 3:20 a.m. and 4 a.m., according to Xinhua, China’s official news agency. Witnesses told Xinhua of seeing “flashes of fire” and also of hearing “sporadic gunshots” after the explosions.

Xinhua said that a group of “criminals” held a drive-by attack against a public security office in Kuqa and another building, tossing homemade explosives that destroyed two police cars. Initial accounts indicated that two officers were killed, though later accounts suggested that two officers were wounded. Officers shot dead five of the assailants.

The police were continuing to search for suspects in Kuqa, a city of about 400,000 people that is located in the southern part of Xinjiang.

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REPORTAJE: CHINA SUBE AL PODIO
China saca pecho

José Reinoso

El País, 10 de agosto de 2008

"La máxima prioridad del país en este momento es que los Juegos Olímpicos sean un éxito". La frase, pronunciada hace unos días por el presidente chino, Hu Jintao, ante un grupo del Politburó del Partido Comunista Chino (PCCh), no deja lugar a dudas. Pekín debe triunfar ante el mayor evento deportivo que se celebra en el mundo cada cuatro años. Porque los Juegos, con una audiencia global que algunos observadores cifran en 4.000 millones de telespectadores, son la gran ventana al mundo y tienen un efecto para la imagen del país organizador que va mucho más allá de las dos semanas y media que dura la competición. Y si no, que se lo pregunten a Barcelona, cuya resonancia y popularidad se disparó como consecuencia de los Juegos Olímpicos de 1992.

Para los dirigentes chinos es imprescindible que el gran evento sea un éxito de organización, seguridad, medio ambiente y, si es posible, también deportivo, porque esto les permitiría lograr su objetivo: sancionar el ascenso de China en la escena internacional y subir al podio de los países poderosos y respetados. Al mismo tiempo legitimará al régimen ante la población con un baño de nacionalismo.

"Barcelona es una ciudad muy bonita. Me gustaría ir". No lo dice un joven universitario, instruido o viajado, de los que cada vez hay más en China, sino un habitante del Pekín popular que en su vida ha salido del país, pero que, como muchos chinos, sigue con fidelidad la televisión.

Durante los últimos meses, las cadenas oficiales han emitido numerosos reportajes relacionados con los Juegos, y Barcelona ha sido uno de los objetivos de los periodistas. De ahí que cuando se pregunta a los locales qué conocen de España, contestan que los toros (por la televisión), el fútbol (preferentemente, el Real Madrid) y Barcelona (de oídas). "Y las mujeres son muy guapas", añaden. Si tienen más cultura, citan tres artistas: Dalí, Gaudí y, en menor medida, Picasso. Los tres, curiosamente, relacionados con la capital catalana.

Para el Gobierno de Pekín no se trata con los Juegos de impulsar el turismo en un país que ya figura entre los primeros destinos de viaje del mundo, sino de dar una nueva versión de aquella frase que Mao Zedong pronunció el 1 de octubre de 1949 desde lo alto de la Puerta de la Paz Celestial, en la plaza de Tiananmen, cuando proclamó la fundación de la República Popular China: "El pueblo chino se ha puesto en pie".

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QUEST FOR GOLD

The spectacular opening ceremony is a symbol of Chinese might—but also of redemption

Melinda Liu

Newsweek, August 8, 2008

From inside the 91,000-seat Bird's Nest stadium, fireworks dazzled and the thunder of 2,008 performers drumming on traditional fou percussion instruments rolled throughout the stadium. High-tech special effects gave even the kitschiest subject matter a startling edge. An ode to China's invention of movable type—ho hum, you might say— morphed into a vast sea of undulating cubic shapes, simulating a giant computer keyboard—and took my breath away.

When five-time Olympic medal winner Li Ning prepared to ignite the Olympic flame, invisible wires swooped him skyward for a gravity-defying space-walk around the stadium's rooftop opening. When gymnast Li, who launched a successful sports clothing and accessories empire after snagging three gold medals in Los Angeles, finally lit a gigantic torch perched on the rim of the Bird's Nest, the crowd went wild.

This was China's soft-power version of "shock and ." Or at least, that metaphor ran through my mind as the pyrotechnics reminded me of watching the U.S. "shock and awe" bombing of Baghdad in 2003 from my Palestine Hotel room balcony. Just as Washington's adventure in Iraq today symbolizes the beginning of the decline of U.S. influence around the world—despite its military might—so will China's hosting of these Olympics be seen as a sign that it has arrived as a global power, despite its tarnished human rights record. Nowhere will this tilting balance of power be more pointedly symbolized than in the Olympic medal count, where China may have abetter than even chance of snagging the highest number of gold medals, displacing the U.S.

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GROUP SAYS VIDEO WARNS OF OLYMPIC ATTACK

Edward Wong

The New York Times, August 8, 2008

BEIJING — A terrorist group seeking an independent Muslim state in western China has released a video threatening an attack on the Olympic Games here, according to an American organization that tracks terrorist Internet posts.

The video’s opening graphics show a burning Olympic logo and an explosion superimposed over one of the athletic sites, said the monitoring organization, IntelCenter, based in Alexandria, Va.

According to IntelCenter’s description, a man holding an assault rifle, who identifies himself as Abdullah Mansour, says in the Uighur language: “We, members of the Turkestan Islamic Party, have declared war against China. We oppose China’s occupation of our homeland of East Turkestan, which is a part of the Islamic world.”

He warns Muslims not to go to the Games and not to let their children go. “We do not want to see any Muslim brothers and sisters who believe in Allah and his Holy Prophet Muhammad, who believe in the next life and the day of judgment, get hurt by our fire targeted at China,” he says.

The Uighurs, a Turkic Muslim people, dominate the Xinjiang region in western China.

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INDIA AS A US HEDGE AGAINST CHINA

Jeff M Smith

Asia Times, August 7, 2008

With a housing crisis in full bloom, and a presidential campaign in overdrive, Americans can be forgiven for overlooking the frenetic race to salvage the US-India civil nuclear agreement now underway.

First came Indian Prime Minister Manmohan Singh's narrow triumph in a no-confidence vote in parliament last month. Manmohan stood down fierce opposition from the left and, in a chaotic and unruly session, risked his governing coalition by forcing the vote.

Only weeks later, on August 1, the International Atomic Energy Agency signaled its approval of India's draft plan for inspection, clearing the second of four hurdles. Only the 45-member Nuclear Suppliers Group (NSG), where approval is likely, and the US Congress, where nothing is guaranteed, now stand in the way.

In Washington, supporters can trumpet the backing of political heavyweights - the George W Bush administration, Republican Senator John McCain, and, at least tentatively, Democratic Senator Barack Obama - but remain stifled by non-proliferation hawks and a frantic legislative calendar. (An arcane caveat to the nuclear deal requires that to call a vote, Congress be in consecutive session for 30 days after the NSG's approval. Short of an unexpected extension, this may not be possible.)

Yet the deal's advocates press on, mustering visions of a vast economic windfall and lucrative arms deal to follow, while behind closed doors emphasizing one selling point that appeals to both sides of the aisle: America must recruit the Indian tiger to hedge against the rising Chinese dragon.

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INDIA, CHINA MUST BOOST SPENDING TO CUT CHILD DEATHS, UN SAYS

Ed Johnson

Bloomberg, August 6, 2008

India, China and other countries in the Asia-Pacific region must boost public health spending by at least 2 percent in order to reduce the number of children dying before their fifth birthday, the United Nations said.

In 2006, 2.1 million children under five years old died in India, one-fifth of the world's total, and 415,000 died in China, the UN Children's Fund, Unicef, said in a report.

Poor neonatal care, pneumonia, diarrhea and malnutrition are among the major causes of child deaths in the region, according to the report. Public health spending in the Asia-Pacific is on average 1.9 percent of gross domestic product, compared with the world average of 5.1 percent, Unicef said.

China and India are the world's two most populated countries, with 1.3 billion and 1.1 billion people respectively. China is the world's fastest-growing major economy, expanding at 10.1 percent in the second quarter, followed by India, whose economy grew 8.8 percent in the quarter ended March 31.

Both countries have made "great strides'' in tackling infant mortality, according to the report.

China reduced the under-five child mortality rate by 80 percent between 1970 and 2006, to 24 per 1,000 live births from 118, the UN said. In India, the rate dropped by 60 percent, to 76 per 1,000 live births in 2006 from 236 in 1960.

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CHINA BLAMES ATTACK ON MUSLIM SEPARATISTS

Edward Wong and Andrew Jacobs

The New York Times, August 6, 2008

KASHGAR, China — A day after two men attacked a military police unit in the country’s far northwest, killing 16 and wounding 16 others, the Chinese authorities sought to portray the ambush as an act of terrorism and said the men were members of an outlawed organization they contend has links to Al Qaeda.

The men, Muslims belonging to China’s ethnic Uighur minority, attacked the brigade early Monday morning as the officers lined up for calisthenics outside their barracks in central Kashgar. The attackers rammed the police with a dump truck and then lobbed homemade grenades. The authorities said the two arrested men had spent a month planning the attack as part of an effort by homegrown Islamic terrorists to disrupt the upcoming Olympic Games in Beijing.

“We can see clearly that these forces are trying to wage a psychological and violent battle against the Olympics,” Shi Dagang, the Communist Party secretary of Kashgar, said at a news conference Tuesday. “They want to turn the year 2008 into a year of mourning for China.”

Days before the start of the opening ceremonies, the attack rattled security officials in Beijing, who have long warned that the greatest threat to the Games comes from members of the East Turkestan Islamic Movement, a group that the authorities have blamed for a recent string of attacks in the Xinjiang Uighur Autonomous Region. Some Western analysts have cast doubt on whether the group is strong enough to pose a serious threat.

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INDIA STRUGGLES TO REGAIN CONTROL AS ELEPHANT ECONOMY DOES ABOUT-TURN

Rhys Blakely

The Times, August 4, 2008

The rise of India's economy is often compared to the progress of an elephant - slow and plodding when compared with the dragon of China, but invested with a heavy sense of inevitability. In the past six months, however, the elephant has performed a disconcerting about-turn.

In January India appeared to be in excellent shape. Annual GDP growth was close to 9 per cent, corporate profitability had risen by 20 per cent in a year and the stock market had surged 50 per cent. The elephant was trundling along at full speed.

Seven months later, Bombay's benchmark Sensex index has lost 40 per cent of its value and foreign investors are fleeing the market.

Andrew Holland, head of proprietary trading at Merrill Lynch in Bombay, said: “This time last year the talk was of India decoupling from the troubles of the rest of the world economy. Now it's clear that India has its own problems. It has gone from hero to zero.”
The bad news has been unrelenting. The rupee has plunged amid fears that India's fiscal deficit is spiralling out of control. In response, the country's fragile coalition Government has made massive populist handouts in the run-up to a general election that must be held before May.

Fitch, the ratings agency, recently downgraded the outlook on India's sovereign debt, taking it only one step from junk status.

Goldman Sachs has just lowered its GDP growth forecast for 2008 to 7.5 per cent - a rude awakening for a nation that was gunning for double figures. Robert Prior-Wandesforde, the HSBC economist, said: “Just as many forecasters and markets were too optimistic in 2005-07, effectively running with the view that whatever China could do, India could do better, there are now some that are suggesting that it can do nothing right.”

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WILL A STRONG RUPEE WIN VOTES?

Swaminathan S Anklesaria Aiyar

The Times of India, August 3, 2008

High inflation means that the Congress-led UPA government is in serious danger of losing the next general election. Voters tend to revolt when inflation exceeds their tolerance level, which today is probably no more than 5%. Wholesale price inflation is currently a whopping 12%. Consumer price data are not available for recent weeks, but are less alarming, suggesting consumer inflation of maybe 8%. Still, that is well above what is electorally tolerable.

In recent years, voters have tended to oust four-fifths of incumbent governments, notwithstanding record economic growth. This reflects widespread dissatisfaction with the quality of governance. Add high inflation to misgovernance, and the chances of an incumbent being re-elected fall close to zero.

What will the Congress do to improve its chances? I offer two predictions. First, the government will seek to strengthen the exchange rate of the rupee, making imports cheaper and thus, creating downward pressure on prices. Second, after having raised interest rates thrice in the last two months, it will raise them further soon, but then lower them shortly before the poll date. This strategy will aim to check inflation right now, while reducing the sting of high EMIs before the election.

A stronger rupee will reduce the profitability and competitiveness of exports. And higher interest rates will hit investment as well as consumer credit, which is crucial for selling property and consumer durables (like cars and two-wheelers). But at election time, politicians naturally favour inflation control over growth.

Politicians have used many financial gambits over the years to try and influence elections. The farm loan waiver is one such. But never before has the exchange rate been used as a vote-winner. That may be about to change. In past decades, India was largely self-sufficient, and had high import barriers. In such circumstances, the exchange rate had only a minimal effect on inflation — other factors mattered much more. But today, imports of goods and services account for over 25% of GDP, and so have a substantial impact on prices. World commodity prices have skyrocketed in the last year, raising the spectre of imported inflation.

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DESPITE FLAWS, RIGHTS IN CHINA HAVE EXPANDED

Howard W. French

The New York Times, August 2, 2008

SHANGHAI — For the past two decades, China’s people became richer but not much freer, and the Communist Party has staked its future on their willingness to live with that tradeoff.

That, at least, is the conventional wisdom. But as the Olympic Games approach, training a spotlight on China’s rights record, that view obscures a more complex reality: political change, however gradual and inconsistent, has made China a significantly more open place for average people than it was a generation ago.

Much remains unfree here. The rights of public expression and assembly are sharply limited; minorities, especially in Tibet and Xinjiang Province, are repressed; and the party exercises a nearly complete monopoly on political decision making.

But Chinese people also increasingly live where they want to live. They travel abroad in ever larger numbers. Property rights have found broader support in the courts. Within well-defined limits, people also enjoy the fruits of the technological revolution, from cellphones to the Internet, and can communicate or find information with an ease that has few parallels in authoritarian countries of the past.

“Some people will tell you, look at the walls, and say they are still pretty high, while others will tell you that there is a lot of space between the walls,” said Nicholas Bequelin, a China specialist at Human Rights Watch. “Both things are true.”

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BEIJING'S OLYMPIC SMOG: HOW BAD WILL IT BE?

China's blue-sky blues aren't going away even with factories closings and restricted driving. The region's climate is part of the problem

Tatyana Gershkovich and Catherine Arnst

Business Week, August 1, 2008

A week before the start of the Olympics, Beijing's smog still threatens the Games. The effects of the polluted air are worrying to many Olympic athletes, some of whom have attempted to limit time spent in Beijing. National teams from the U.S., Britain, France, and Germany, to name just a few, have been doing their pre-Olympics training in Japan (BusinessWeek.com, 2/12/08) rather than take their chances in China. Australia's Olympic Committee is giving athletes concerned about the smog's impact on their health the O.K. to withdraw from events. Record-holding Ethiopian distance runner Haile Gebrselassie, who has asthma, has pulled out of the marathon, citing bad air.

Chinese officials knew they had to address the pollution problem (BusinessWeek.com, 7/28/08) and promised Beijing would enjoy "blue sky days" for the duration of the Olympics. To do that, they have shut hundreds of factories and coal-burning plants in Beijing and its environs. They have implemented odd-even day driving restrictions for most Beijing residents, with those who do not obey the rules threatened with a $14 fine. And they have made businesses stagger their hours of operation in order to avoid rush-hour commutes that generate spikes in pollution.

These actions should help reduce what's known as the "urban heat island" effect, in which air warmed by activity in the city creates a heat bubble that traps pollutants. Still, after spending $16 billion to improve the city's air quality by shutting down factories and improving mass transit, taking half the city's 3.3 million cars off the roads each day, and planting 22 million trees, China's leaders must wonder what could be missing when they see gray days like July 31, when smog hung over the city.

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CHINA’S INDUSTRIAL AMBITION SOARS TO HIGH-TECH

David Barboza

The New York Times, August 1, 2008

SHENZHEN, China — Few people have heard of the BYD Corporation — BYD for Build Your Dream — but this little-known company has grown into the world’s second-largest battery producer in less than a decade of existence. Now it plans to make a great leap forward: “We’d like to make a green energy car, a plug-in,” said Paul Lin, a BYD marketing executive. “We think we can do that.”

Even in go-go China, such lofty aspirations may sound far-fetched. But BYD has built a 1.6-million-square-foot auto assembly plant here and hired a team of Italian-trained car designers; it plans to build a green hybrid by the end of the year.

No longer content to be the home of low-skilled, low-cost, low-margin manufacturing for toys, pens, clothes and other goods, Chinese companies are trying to move up the value chain, hoping eventually to challenge the world’s biggest corporations for business, customers, power and recognition.

The government is backing the drive with a two-pronged approach: using incentives to encourage companies to innovate, but also moving to discourage low-end manufacturers from operating in southern China. That step would reverse one of the crucial engines of this country’s spectacular economic rise.

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