Wednesday, March 7, 2012

130 Taiwan blocks visit by Uighur leader. BHP, Rio cave in to China

Taiwan Government blocks visit by Uighur leader Kadeer. BHP, Rio cave in to China

(1) Taiwan Government blocks visit by Uighur leader Kadeer
(2) Kadeer ‘very disappointed’ by Taipei
(3) In China, Google has been out-manoevred by look-alike Baidu; eBay similarly
(4) China to build up Xinhua as a counter to Reuters, AFP, AAP & other news agencies
(5) BHP "scuppered" China Inc - John Garnaut (son of Ross)
(6) BHP, Rio cave in to China: rethink iron ore deal
(7) China's satellite diplomacy shifts a gear

(1) Taiwan Government blocks visit by Uighur leader Kadeer

http://www.taipeitimes.com/News/front/archives/2009/09/26/2003454520

Government prevents visit by Kadeer

NOT WELCOME: The premier said the government needed to consider the impact of her visit on Taiwan’s international relations, image, cross-strait relations and economy

By Flora Wang and Loa Iok-sin

Saturday, Sep 26, 2009, Page 1

The government yesterday decided to deny World Uyghur Congress president Rebiya Kadeer entry to Taiwan on the grounds that her visit would harm the national interest.

Minister of the Interior Jiang Yi-huah (???) said on the legislative floor yesterday afternoon that the government would not allow Kadeer to visit Taiwan if she applied for a visa.

Jiang said the World Uyghur Congress was related to a terrorist organization, while many countries had also been alerted to the congress’ general secretary. ...

Premier Wu Den-yih (???), who was fielding questions from Chinese Nationalist Party (KMT) legislators, said the Cabinet supported the ministry’s decision.

Kadeer had been invited by two civic groups — Guts United Taiwan and the Taiwan Youth Anti-Communist Corps — to visit Taiwan in December.

The groups extended the invitation after China protested against the Kaohsiung Film Festival’s decision to screen The 10 Conditions of Love, which focuses on Kadeer. ...

Wu said the government needed to consider the impact of her visit on Taiwan’s international relations, image, cross-strait relations and the economy.

KMT headquarters yesterday also said it supported the government’s decision to reject any visa application by Kadeer and condemned the Democratic Progressive Party (DPP) for manipulating the issue for its own political interests.

KMT spokesman Lee Chien-jung (???) said US President Barack Obama had recently decided not to meet the Dalai Lama during his trip to the US to protect the country’s national interests. Japan had also prevented visits by former president Lee Teng-hui (???) for the same reason.

(2) Kadeer ‘very disappointed’ by Taipei

http://www.taipeitimes.com/News/front/archives/2009/09/27/2003454588

By William Lowther and Shih Hsiu-chuan
STAFF REPORTERS , WASHINGTON AND TAIPEI
Sunday, Sep 27, 2009, Page 1

Exiled Uighur leader Rebiya Kadeer on Friday accused Taipei of bowing to Beijing’s pressure in refusing to allow her to visit Taiwan and demanded an apology from the President Ma Ying-jeou (???) administration for linking her and the World Uyghur Congress (WUC) to “terrorists.”

“I am filled with regret, I am very disappointed,” she said during an emotional press conference in her Washington office.

On Wednesday, Kadeer accepted an invitation from black metal band Chthonic (????) frontman and Guts United Taiwan president Freddy Lim (???) to visit Taiwan in December.

On Friday, however, Premier Wu Den-yih (???) supported Minister of the Interior Jiang Yi-huah’s (???) recommendation that the government not permit Kadeer to visit as the WUC, of which Kadeer is president, “is closely associated with an East Turkestan terrorist organization … and it would be in the best interests of Taiwan and its people to prohibit her from visiting the country.”

Jiang said that WUC secretary-general Dolkun Isa is also among the names of “important international terrorist organizations/individuals promulgated by the Interpol.”

Kadeer said it was the first time a country refused to grant her a visa, adding that over the last few years she had visited 28 countries.

“They all treated me with the greatest respect,” she said.

Beijing accuses Kadeer of inciting ethic violence and of encouraging China’s Uighur population to stage illegal protests. ...

(3) In China, Google has been out-manoevred by look-alike Baidu; eBay similarly

Dominant elsewhere, Google struggles in China

By John Boudreau

jboudreau@mercurynews.com

Posted: 10/07/2009 03:16:10 PM PDT

http://www.mercurynews.com/breaking-news/ci_13507560?nclick_check=1

BEIJING — In China, Google means underdog.

While the Mountain View company dominates the search market in the United States, it is not part of the pop lexicon on the other side of the Pacific. In its nine years in China, which now has the world's largest Internet audience, Google has struggled.

It has seen its services temporarily shut down by the government, and has been accused of purveying porn. Google China has also been outmaneuvered by a nimble rival, Baidu.com, the look-alike site that claims more than 60 percent of the market in China.

"It's a constant struggle," said Yuke, a Google employee who goes by one name. He was Google's lead product manager in China before managing the social responsibility department. "Sometimes we move ahead, sometimes we lose ground. It's a tough fight."

In many ways, Google's experience in China is typical of what international companies face when trying to tap into the emerging wealth of this vast nation of 1.3 billion. They learn, often at great cost, that their China enterprises need "a lot of hand-holding," said Mark Natkin, managing director of Beijing-based Marbridge Consulting.

Google's China business represented just a sliver of its 2008 revenue of $21.8 billion, "a rounding error" of not more than $300 million, according to RBC Capital Markets analyst Ross Sandler.

Other Silicon Valley global giants have been humbled here, as well. In 2005, Yahoo handed over operations of Yahoo China to Alibaba after the Sunnyvale company took a $1 billion, 40 percent stake in its erstwhile Chinese competitor. Five years ago, eBay appeared untouchable in China after acquiring EachNet, China's then-leading online auctioneer. Now, though, eBay ranks far behind Taobao, which controls about 80 percent of the online retail market.

"I call it the Pacific Ocean gap," said Victor Koo, chief executive of Youku.com, a Beijing-based online video site. "If you have to wait for a conference call across the Pacific (before making a decision), it can take days. You can't compete. We make decisions faster and we understand the market better."

Though Google launched a Chinese version of its search engine in 2000, before Baidu showed up, it wasn't until 2005 that the Mountain View company dispatched an on-the-ground team led by the charismatic Kai-Fu Lee, who just left the company to start a venture fund. Under his leadership, Google nearly doubled its share of the market to 31 percent.

But Baidu dominates China's online culture, and has trumpeted its Chinese roots in commercials appealing to nationalism.

"In China, everybody uses Baidu," said Meya Hsu, a 20-year-old college student sitting in a cafe with her MacBook laptop. She uses Google only as a last resort, such as to look up information about American pop stars.

Until recently, Google has done next to no marketing, said Kaiser Kuo, a Beijing writer and China Internet expert. Most people can't even spell Google and are unaware that there's a simpler URL, g.cn.

Google's ramp-up is an acknowledgment of a rapidly growing market: China's 700 million mobile phone subscribers and 338 million Internet users dwarf those of any other country.

Google's 500 employees in China share a 10-story complex in Tsinghua Science Park in Beijing's high-tech Haidian district. The company has transported its valley culture here — workers curl up on brightly colored couches with laptops, play pingpong, take belly dancing lessons and nibble throughout the day on free snacks and meals prepared by a chef. Teams of engineers devise China-specific products, including a free music service that features lyrics for karaoke-loving Chinese.

Google now is "putting up a fight. They have made good progress," said Youku.com's Koo.

But Google may always face special scrutiny from the government, which is wary of foreign Internet companies. It not only has shut down Google on occasions but also has redirected Internet traffic to Baidu.

Google has been careful not to provide products — such as blog services — that require it to gather personal data on users for fear of being forced to turn over information to the government, a decision that hurts it in the market, analysts say. Google runs its Gmail service on servers located outside China, making it more secure from government eyes.

"They are haunted by the ghost of Tom Lantos," said Kuo, referring to the late San Mateo congressman who berated Yahoo executives during congressional hearings after the company handed over e-mail records of journalist Shi Tao, who was accused by the Chinese authorities of leaking state secrets abroad and sentenced in 2007 to 10 years in prison.

This summer, online activists relied on Google's Gmail to successfully campaign against the government's efforts to require PC makers to install Internet filtering software on all new machines. "We always tell Chinese people to use non-China-based services," said a Shanghai-based researcher who goes by the name Isaac Mao.

While sometimes running afoul of the Chinese government, Google has been hammered by human rights organizations for cooperating with the government's efforts to block politically sensitive search results. Google searches in China filter out findings objectionable to the government, but users are told they are not getting access to all information because of government restrictions.

"I think Google has tried to strike a balance between protecting access to as much information as possible and to expand that while at the same time not being purer than the pope so people don't get access to information in China," said Susan Shirk, a former deputy assistant secretary of state in the Clinton administration responsible for U.S. relations with China. Google, she added, is playing an important role in China's online civil society.

"Any foreign company that does content online is in for a rough period," said Rebecca MacKinnon, an expert on the Internet in China at the University of Hong Kong. "If you want to beat the Chinese competitors, you have to really lower your ethical standards in terms of how you are going to treat your users. I don't see any other way to do it."

China-based Googlers, however, believe time is on their side. As China's telecom giants invest an estimated $59 billion in 3G infrastructure in 200 cities during the next three years, Google hopes to capture leadership in mobile search. It recently teamed up with China Mobile, the country's largest mobile carrier, which will deploy Google's Android operating system on handsets.

"From a pure technology point of view, it's very hard to compete with Google," said Feng Hong, the company's product manager of music search. "There is a long, long way for Google to go."

(4) China to build up Xinhua as a counter to Reuters, AFP, AAP & other news agencies

China unveils its global media ambitions

PASCALE TROUILLAUDOctober 11, 2009 - 12:54PM

AFP

http://news.brisbanetimes.com.au/breaking-news-world/china-unveils-its-global-media-ambitions-20091011-gs41.html

China wants to expand its global media presence to reflect its burgeoning influence on the international stage, and has tapped a few major groups with massive financial backing for the job.

In a symbol of new Chinese ambition, President Hu Jintao personally opened last week's inaugural World Media Summit, organised by the state Xinhua news agency and bringing together executives from 170 media outlets.

In the massive formal reception rooms of the Great Hall of the People on Beijing's Tiananmen Square, foreign delegates applauded as Hu offered a vision of a "true, correct, comprehensive and objective communication of information".

To the right of Hu - who is also general secretary of the ruling Communist Party, which strictly controls the media in China - sat Rupert Murdoch, who embodies this new Chinese dream with his worldwide media investments.

Murdoch's News Corporation, the Associated Press, Reuters, the BBC, Russia's ITAR-TASS, Japan's Kyodo agency, Turner Broadcasting System (TBS), and Google agreed to co-host the so-called "Media Olympics" - organised at great expense by Beijing.

Agence France-Presse (AFP) participated in the debates, most of which related to the challenges of reporting in a digital and multimedia age.

Stung by several high-profile public relations disasters last year, including the chaotic Olympic torch relay, Beijing has tasked two or three signature media groups with projecting the image of a powerful China abroad.

It has earmarked 45 billion yuan ($A7.17 billion) to fund the expansion of groups including Xinhua, state television CCTV and CRI radio, according to Hong Kong media - at a time when the industry is facing a major money crunch elsewhere.

Xinhua - which is planning to add to its 117 bureaux around the world, which report in eight languages - would like to join the tight circle of international news agencies.

"We are in a restructuring phase - we've just opened a multimedia desk," Xinhua president Li Congjun told AFP. The agency has opened a video service and is starting to offer mobile applications.

CCTV just launched an Arabic-language channel, reaching 300 million people in 22 countries, and is gearing up to start a Russian service. CRI, which already broadcasts in 43 languages, is also expanding its presence abroad.

China also wants to set up media and entertainment conglomerates similar to News Corporation or Time Warner, that would have some private funding.

"As China moves from a domestic-oriented participant to an international industry leader, it will grow its own Time Warner," said Steve Marcopoto, president and managing director of TBS Asia Pacific Ltd, part of the Time Warner group.

Murdoch said he was "genuinely looking forward to that competition" from China, but also railed against the "lack of intellectual property protection domestically" and what he called "content kleptomaniacs".

"There are interesting media companies emerging in China but piracy will make it difficult for them to generate the profits at home that would fuel growth abroad," he warned.

He also told summit participants that the groups were "not exposed to the competition that would prepare them for the rigours of the global marketplace," calling on China to open the "digital door" of its media market.

China has the world's largest number of internet users at 338 million, according to official figures - more than the whole US population - and the largest mobile phone market at 710 million. ...

© 2009 AFP

(5) BHP "scuppered" China Inc - John Garnaut (son of Ross)

How BHP scuppered China Inc

October 15, 2009

Foreign investment guidelines have created a new round of confusion and bewilderment in Beijing, writes John Garnaut.

http://www.smh.com.au/business/how-bhp-scuppered-china-inc-20091014-gxhs.html

In February 2008 the Chinese Government-owned aluminium giant Chinalco derailed BHP Billiton's plans for a full takeover of Rio Tinto by snatching 12 per cent of its London shares.

The world's biggest miner immediately began a mammoth but discreet media and government relations campaign against the Chinese investment, including private talks between its chairman, Don Argus, and the Prime Minister, Kevin Rudd, at the Lodge in Canberra.

"Emails from BHP were circulating at the highest levels, copied in to ministers' offices, about all the 'China Inc' stuff," said Stephen Joske, a former Treasury official who left Canberra in July last year.

The BHP campaign was ratcheted up after Chinalco again stunned the market in February by signing an additional $US19 billion investment deal with Rio.

That second deal died a natural if acrimonious death when Rio walked away from it in favour of an iron ore tie-up with its rival BHP Billiton.

"It was Rio's decision to walk away, not the Government's," emphasised a source close to BHP. "FIRB [Foreign Investment Review Board] or the Government never even ruled."

In the dying days Canberra had told the Chinese ambassador, Zhang Juncai, that the Chinalco bid would be approved. But that was based on a radically pared down version of the deal as briefed by Rio, which Chinalco had never agreed to.

If Chinalco executives were stunned and wounded by the way their deal fell apart, they were also a little awestruck by the quiet backroom efficacy of BHP.

''I admire BHP's strategic discipline and the way it plays the game," said Chinalco's key acquisition strategist, Wang Wenfu, who spearheaded the Rio Tinto bids. "But I did think it was unusual to not make a single submission to the Senate inquiry on foreign investments when it was busy supplying ministers with dossiers on that very topic behind the scenes.''

Since then a long list of Chinese investments in Australia have been delayed, discouraged or rejected by the Australian Government.

In recent weeks it has rejected two Chinese bids and instructed a number of other companies to resubmit their applications.

In May, China Nonferrous Metals Mining Group applied to the FIRB for a $500 million bid for control of the rare earths miner Lynas. The application went back and forth until the regulator was satisfied that a marketing mechanism had been devised that would not exacerbate China's stranglehold on the rare earths market.

But on the morning of September 23, China Nonferrous received a message from the investment regulator saying that "we are inclined to approve this transaction and we can approve it tomorrow, with just two minor amendments", a source privy to the conversation said.

The amendments were to reduce the Chinese shareholding from 51 per cent and reduce the number of Chinese nominees on the board to a minority.

The Chinese company was told that the review board wanted to send a message to China's economic planning agency, the National Development & Reform Commission, that it had to comply with Swan's investment guidelines.

The problem was that China Nonferrous thought it already had complied. It immediately walked away from the deal.

"They grossly misjudged the sovereign insult and failed to see that China Nonferrous would make a decision not to use up their political capital trying to get a lesser deal and save it for another transaction," said a source close to the deal. "It is very, very difficult to do transactions when the policy sands keep shifting beneath us."

The review board had intended to announce the Lynas deal's approval on the following day, September 24. That would have coincided with the board's chairman, Patrick Colmer, laying down tough new guidelines that appear to restrict foreign government-owned investors to 50 per cent of greenfield resource projects and to less than 15 per cent of major ones.

These guidelines were intended to add certainty to the process. Instead, they have created a new round of confusion and bewilderment in Beijing.

Observers and participants in the deal wondered whether the $US3 billion bid by Yanzhou Coal for Felix Resources - also stalled at the review board - would now be ruled off limits.

"The 15 per cent test has caused absolute confusion here," said a source close to that deal in Beijing, adding that he thought the deal would still go through.

Those who frequently dealt with the board told BusinessDay that the system has been enveloped in additional rolls of red tape since Colmer's comments.

"A response from FIRB is now beginning to look like an ACCC market inquiry analysis Q&A," the lawyer said.

Indeed, a whole industry of lawyers, lobbyists and retired politicians is springing up to earn fees by promising China that they can divine the mysteries of Australia's foreign investment laws. Many contacted by BusinessDay are critical of the review board and others are critical of the Australian media. But they are all fearful of speaking publicly, lest they offend the agency they are paid to deal with.

The mining magnate Clive Palmer, who has close business dealings with China, caused fireworks recently by calling the review board a "racist body". Privately, some Chinese executives are equally scathing. One leading Chinese investor recently privately complained about Canberra's "xenophobia" in promising to send his capital elsewhere.

Chinese officials have tended to be more restrained, perhaps given that it is notoriously difficult for foreign companies to enter the Chinese mining industry.

But Australia's investment restrictions seem popular at home, with 50 per cent of respondents to this week's Lowy Institute survey saying the Government was still letting in too much Chinese investment.

But Joske, the former official, said the public opinion problem was of the Government's own making.

"There wasn't strong public resistance to Chinese investment in Australia a few years ago," he said.

"But indecision from the Government and negative signals created a vacuum in which concerns grew. As soon as FIRB started to define what the national interest is they bound their hands without really resolving the issue; now FIRB is being used to fan public opinion and concerns about state-owned enterprises."

Some reports have hinted that BHP Billiton succeeded in framing the thinking of senior Government advisers, including in the office of Ferguson, who is planning to visit China this month.

But Joske's comments are the first insider's confirmation of problems with the investment policy process, the extent of BHP's influence and the strategic economic questions at stake. Joske, who had been a macro economy adviser to the then treasurer Peter Costello, a Treasury representative in Beijing and also the lead China economy analyst at the Office of National Assessments, was privy to the Government's investment decision-making processes following Chinalco's initial tilt at Rio Tinto.

He said he was "shocked" at Treasury's failure to brief its boss, Swan, on the usual pros and cons of foreign investment

"I suspect Treasury did what they thought the minister wanted," he said. "Costello hated lobbyists but Swan seems to have let some of them get a foot in the door."

Swan has repeatedly said Australia welcomes investment from all sources, including China subject to the national interest. He declined to comment for this story.

Joske said the investment policy setting was getting worse because of a lack of leadership.

"There is no strategic framework with China," he said. "I don't know what caused it but it's a fact. Because of this vacuum you get crap policy."

And the result, he said, is that the review board ''has been allowed to depart from the spirit of the open economy and to effectively dominate the entire economic relationship".

Joske said Chinese state-owned companies did act differently to non-state companies, but not in ways that the Australian Government understood.

"The issue of Chinese Government control of state-owned enterprises is very complicated and very hard to grasp" he said. "This gets back to this mystery as to why the Australian Government has chronically under-resourced its economic engagement on China.

"The thing that's inexplicable is this is the overall approach to China: you're setting foundations for Australia's economic future," he said. "The business lobbyists have dropped the ball, the bureaucracy is under-resourced, BHP is doing what it always does and the Opposition is making things worse."

(6) BHP, Rio cave in to China: rethink iron ore deal

SMH headline: BHP, Rio rethink iron ore deal
watoday headline: BHP, Rio cave in to China

BARRY FITZGERALD

October 15, 2009

http://www.smh.com.au/business/bhp-rio-rethink-iron-ore-deal-20091015-gz5x.html
http://www.watoday.com.au/business/bhp-rio-cave-in-to-china-20091015-gz89.html

Plans by BHP Billiton and Rio Tinto to create a jointly owned $US116 billion ($A127.2 billion) iron ore colossus in Western Australia's Pilbara are being recast to deal with competition concerns in Europe and fears in China - the world's biggest iron ore consumer - that the combination would have too much pricing power.

It is believed the decision follows warnings by Australia's ambassador to China, Geoff Raby. In Melbourne recently, he told both companies the proposed merger risked a serious backlash from their largest iron ore customer.

A key element of the June 5 iron ore compact between the pair was that up to 15 per cent of the joint venture's iron ore production would be marketed by the joint venture. That has been dropped.

No mention was made of the need for clearance from Europe's competition regulator, or the wailing from the Chinese steel industry on the pricing issue.

The companies did acknowledge that the change was made with a view to customers' concerns, saying the change ''will clarify the nature of the joint venture for customers and emphasise its focus on realising significant production and development synergies''.

The compact between the pair angered the Chinese steel industry and Beijing on another front in that it was central to Rio's decision at the time to walk away from a $US19.5 billion refinancing deal with China's state-owned Chinalco. That deal envisaged the cash injection into Rio in return for stakes in several key Rio assets, including its Hamersley iron ore unit.

But Rio dumped the deal when the rapid improvement in the market meant it could refinance itself through a $US15 billion rights issue, something it came under huge shareholder pressure to do.

The BHP-Rio compact in the Pilbara plans to bring together (initially) about 260 million tonnes of annual production. Because Rio is the biggest Pilbara producer of the two, BHP is to make a $US5.8 billion equalisation payment (essentially for 5 per cent of the combined business) to establish it as a 50:50 joint venture.

There was no mention in the statement from the pair yesterday that the equalisation payment would be undergoing a re-adjustment. There has been speculation that Rio might want to revisit it because of a market perception that BHP was getting too good a deal.

What is clear is that the initial agreement covering the iron ore compact was rushed out to coincide with Rio's decision to walk away from the Chinalco deal. As a result, adjustments before the yet-to-be-reached definitive agreement covering the iron ore joint venture were expected.

At the time, most analysts were confused about the inclusion of the 15 per cent joint marketing proposal, given the broad competition concerns.

It was apparently included on the basis that it would in effect create three marketing pools (the separate marketing by BHP and Rio and the joint marketing pool) compared with two now (the separate marketing by BHP and Rio).

It seems that in the end no one bought it.

(7) China's satellite diplomacy shifts a gear

By Peter J Brown

Oct 7, 2009

http://www.atimes.com/atimes/China/KJ07Ad01.html

In late September, China announced that it would build and launch a new communications satellite for Bolivia in the next three years, and shortly thereafter, China announced that it would do the same for Laos, although no timetable was disclosed. Talk of China's satellite project with Laos has been circulating for over a year. Other countries, including Ecuador, Myanmar and Vietnam as well as a few in Africa, might soon be added to the list.

"The deals involving Laos and Bolivia are not the first Chinese deals with developing countries. China had deals with Nigeria and Venezuela respectively in 2007 and 2008. China has built a better capability to provide satellites and launching services after its efforts in developing space technology for half a century," said Professor Ling Yan, an international law professor at the China University of Political Science and Law in Beijing. "As a developing country, China is willing to cooperate with other developing countries and to mutually benefit from the cooperation."

President Evo Morales of Bolivia had been at the headquarters of the International Telecommunication Union (ITU) in Geneva just two weeks prior to China's announcement, to discuss satellite-related matters with ITU secretary-general Dr Hamadoun Toure. So, this was a signal that Bolivia might move quickly to initiate a satellite project, although few expected any formal announcement until next year. The announcement with Bolivia came soon after Morales met with Chinese President Hu Jintao at the United Nations in New York.

Was the celebration of the 60th anniversary of the founding of the People's Republic of China (PRC) a factor? This cannot be ruled out. After all, Russia's decision earlier this month to delay the planned launch of China's first probe to Mars from late 2009 to 2012 was awkward and unwelcome. Following all of China's well-publicized, space-related activity in 2008, including China's first manned space walk, China's satellite launches and other activities in space had slowed considerably in 2009. As a result, the timing here is ideal and China no doubt welcomes all of this satellite-related publicity.

David Vaccaro, senior analyst at Maryland-based Futron Corp, said that China is actively pursuing satellite deals in Southeast Asia and elsewhere for good reason. "It is certainly consistent with the goals of China's space program," said Vaccaro. "China seeks to use space as a tool of diplomacy in neighboring Southeast Asia and elsewhere. Beyond this, China has long-stated commercial aspirations in space."

However, China's inconsistent track record to date with communications satellites cannot be ignored. China is rapidly building a replacement for Nigeria's Chinese-built NIGCOMSAT-1 after its failure in late 2008, for example. Launched in May 2007, this was Nigeria's first communications satellite. (See Nigeria's Chinese-built satellite goes dark, Asia Times Online, Nov 18, 2008)

China's preference thus far has been to engage in satellite deals announced only after the completion of closed-door negotiations with foreign governments. China has avoided the highly competitive commercial marketplace. However, China's reluctance to participate in an open bidding process may be changing.

For this reason, all eyes are on Vietnam which has announced that it is looking to acquire its second communications satellite, known as Vinasat-2. China's primary satellite manufacturer, the China Academy of Space Technology (CAST), currently features news articles about Vinasat-2 - the Vietnamese have not announced who will provide Vietnam's second communications satellite - on its website, according to Vaccaro.

If China is interested in pursuing this deal, it will certainly face what is likely to be a concerted bid by US satellite builder and defense contractor Lockheed Martin, which built Vinasat-1, Vietnam's first communications satellite. There will also be competitive bids by other US and European satellite manufacturers. As a result, China will have to offer a compelling deal to win this and any other future satellite contracts, according to Vaccaro.

On the other hand, China's generosity is no secret in satellite circles. When China announced a few weeks ago that it would build Pakistan's new communications satellite at a projected cost of US$212 million, a $200 million construction loan from China was part of the transaction. This is the same sum that the Export-Import Bank of China provided to Nigeria in 2006 for NIGCOMSAT-1's construction.

Both the Nigerian satellite and the newer Chinese-built Venezuelan satellite known as Venesat-1, which was launched in late 2008, cost well over $200 million. That is the price tag of the satellite alone, and does not include the amount spent on launch vehicles, launches and ground control facilities which can easily add about $100 million or more to the total cost.

In effect, China may well be offering satellites to developing countries at bargain basement prices, however, accurately calculating the exact cost of these satellite projects is quite difficult because rarely if ever is anything done out in the open. China also tends to cover all the expenses - from financing, and the entire space hardware package to launch and operational support facilities and services and even advanced training of local personnel.

Other satellite vendors are now offering communications satellites which might be viewed as more affordable as well by governments which are strapped for cash, and perhaps a bit reluctant to embrace China's economic and foreign policy agenda. For example, Kazakhstan signed a contract with Moscow-based Khrunichev Space Center for Kazsat-2, a satellite which is scheduled to replace Russian-built Kazsat-1 that was lost in mid-2008. It has an estimated price tag of $115 million contract.

Another satellite manufacturer which has also been making steady progress selling a line of smaller and more modestly priced communications satellites is Virginia-based Orbital Sciences Corp which has customers in Singapore, Malaysia and Australia.

"China in general is using its financial strength as a diplomatic tool especially for smaller, less developed countries. Often, it is locking up raw materials or winning large contracts for Chinese industry," said Patrick French, senior analyst and head of the Singapore Office at research and consulting firm NSR, LLC. "This is likely related to efforts here. Plus, few large international satellite operators will risk buying a Chinese satellite and being tied to a launch in China in the process until things thaw out between China and the US. It just adds too much risk."

Another good reason for China to pursue these deals in the developing world is that it simply offers China an opportunity to fine-tune its satellite products and engage in high tech team-working, while gaining practical experience and improving overall technical competence.

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