This story is meant to scare us away from offshoring but if I'm to be convinced I'd need to see some stats and studies that show wide-scale differences in code quality. Until then this story is just an anecdote and we all know how much those are worth.
There's a good reason why offshore contractors have code of generally lower quality. Here's what a Chinese friend has told me about the employment situation for coders in China. The good programmers usually get good jobs at local firms--most of which don't do outsourcing. The outsourcing positions are primarily taken by the lower-quality programmers.
Thus, when you outsource to China, you're often effectively self-selecting the worst programmers to work on your project. This leads to stereotypes that Chinese programmers are incompetent idiots, when in fact the reality is just that bad Chinese programmers are incompetent idiots, no different than bad Western programmers.
Obviously I have no statistics on this, but I'm inclined to at least somewhat trust the word of someone who has lived there and had experience with the industry. It's also a better explanation than "Chinese are bad programmers" or some equally racist answer.
All Daily WTFs are anecdotes, designed to appeal to IT engineers and programmers, and usually portraying business owners and managers (and the other programmer) in an unfavorable light. It's a formula.
Totally useless for any insight about how to start or run a business.
I doubt anyone on HN is really basing hiring decisions off of this one anecdote. Lighten up people, it's a funny story.
He's a hack. He has a thing for turning factual accounts into shitty urban legends.
As the submission's title says, "you get what you pay for." In my experience, this is the case no matter where the contractor is based.
Have all devs commit work to an SCCS, and keep offline backups. Pretty much protects you from this scenario.