China's Olympic Hangover

China's Olympic Hangover

China's Olympic Hangover

A summary of what's in the major publications.
Aug. 25 2008 7:10 AM

China's Olympic Hangover

The Wall Street Journal and New York Times dedicate front-page coverage to the question: Now that the Beijing Games are over, what lies ahead for China? The WSJ identifies three major challenges for the Chinese: the population flight to urban centers and its impact on a rapidly changing workforce, a widening gap between rich and poor, and "severely constrained supplies of energy and environmental resources" needed to fuel future economic growth. The not-so-favorable odds have policymakers viewing China in a different light. "Americans who worry that China might overtake the United States are worrying about the wrong thing," the WSJ quotes U.S. Treasury Secretary Henry Paulson as saying. "Serious troubles in China's economy could threaten the stability of the U.S. and global economies."

The NYT reckons China's Communist Party won the public-relations battle over the past two weeks, successfully demonstrating "to a global audience that it is a rising economic and political power." It survived protests about Tibet and Darfur, and there was hardly a fuss about domestic human rights concerns. Now the locals have to figure out how to pay for the Games' $43 billion price tag. Oh, and the smog is expected to come back. MarketWatch's analysis is more pointed. Who cares about the record haul of gold medals? China is home to the world's worst-performing stock market, down 53 percent on the year, MarketWatch grumbles.

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The NYT leads its business coverage with promising news: A new drilling boom, which should revive the fortunes of U.S. natural-gas production in domestic gas fields all but abandoned 50 years ago,  is under way. The revival is thanks to innovations in drilling capable of releasing "gas trapped in huge shale beds found throughout North America—gas long believed to be out of reach," the NYT reports. There's a lot to be hopeful for. Natural gas is cleaner, cheaper, and, crucially, it's on this continent, the NYT points out. But the industry is undecided about its potential impact in meeting U.S. energy needs. "The jury is still out how big shale is going to be," Robert Ineson, a natural gas analyst, said.

Precision Drilling Trust, a Canadian oil and natural-gas driller, is convinced of the market potential for shale. According to the WSJ, Precision Drilling has agreed to buy U.S. drilling outfit Grey Wolf Inc. for $2 billion in cash and stock, in a deal to be announced formally today. "The deal will give Precision access to Grey Wolf's substantial presence in the U.S., where gas drilling is undergoing a boom. Grey Wolf, meanwhile, will be able to take advantage of Precision's high-end drilling rigs," the WSJ reports.

There is seldom much promising news to report in the U.S. auto sector, and today is no different. According to the WSJ, American car makers are expected to report big sales declines again this month. Citing new research from J.D. Power & Associates, it says August sales are expected to be better than July's woeful numbers. But now for the bad news: The expected August figures will roll in at just 13.4 million new cars sold, or 2.8 million fewer sales than the year ago period. Light truck sales will be particularly weak, J.D. Power tells the WSJ. Analysts do predict a slight boost in sales, though, as new model-year vehicles begin to hit the lot.

Meanwhile, Toyota Motor is pushing through one of its largest domestic price hikes since the 1970s. Toyota announced on Monday that it would raise the price of its popular Prius and Harrier hybrid models by about 3 percent in Japan to meet the soaring cost of energy and steel, the Associated Press reports. Other car makers are expected to follow Toyota's lead in Japan, AP reports.

Tapping the bond market to raise funds hasn't been this expensive since the early 1990s, the Financial Times reports. The soaring bond costs are yet another "sign the financial crisis is deepening," it warns. According to the FT, spreads for investment-grade companies hit a 10-year high in Europe and Asia last week. In the U.S., it was closer to a 15-year high. Victims of the ever-escalating yields include troubled lenders Fannie Mae and Freddie Mac. But the market is indiscriminately pricing in a higher risk premium for even stable companies. Citigroup, AIG, Deutsche Telekom, and American Express have been hit as well, the FT says.

Call it the "Obama money shot." CNN's secret weapon for capturing the defining moment of Barack Obama's acceptance speech Thursday night at the Democratic National Convention will be Skycam, a $100,000 aerial camera. It's been used to great effect at NBA and NFL games, NYT reports. And now it will be hovering around Invesco Field on Thursday night, filming select moments of what could be the most viewed political convention of all time—and one expected to reap a ratings bonanza for the networks, cable news channels, and political sites on hand. What can we expect from Skycam? "It flies," David Bohrman, CNN's chief of political coverage, tells the NYT.

Bernhard Warner is deputy New York bureau chief at the Industry Standard.