China stimulates property sector

Beijing yesterday said it would lower taxes, make it easier for property developers to obtain credit, and reduce the lock-up period for home sales, during which owners are unable to sell without paying stiff taxes. The measures come after repeated interest rate cuts and the announcement of a Rmb4,000bn ($585bn, £379bn, €407bn) economic stimulus package, all aimed at maintaining growth of at least 8 per cent.

Economists say reviving the property sector is vital to efforts to counter the current downturn, which has worsened in the past month, with factory output growth falling to the slowest pace on record.

The State Council, China's cabinet, said it would shorten to two years from five the period during which home owners are subject to a business tax if they resell their homes.

THE NUMBERS GAME

Perhaps more than any other place in Asia, Hong Kong's energy comes from a powerful relationship with the present. The past is always being obliterated and the future is something you worry about when you get there. After several years living in the city, it can be difficult to remember how certain neighbourhoods first appeared; buildings are torn down and new ones go up in the space of months.?

This disorientation becomes a way of life. If you find a good shop or restaurant, it's important to ask for a business card - finding it again by memory, amid the camouflage of neon lights, can prove almost impossible. You learn to feed your spending impulses immediately: chances are that a store will have closed down or changed hands by the time you make it back.?

But if you really want a study in "the power of now", ride the lifts at Chungking Mansions.?

Built in 1961, the building is one of the world's favourite flophouses. A jumping-off point on the hippy trail during the 1960s and 1970s, it became a staple entry in most dog-eared travel guides. Its five connected blocks (A-E) sit clustered like a gigantic decaying tooth on some of the most expensive real estate in the world - the southern end of Hong Kong's ritzy Nathan Road. The complex is a stone's throw away from the Peninsula Hotel and its guesthouses are close to 30 times cheaper than that hotel's most modest rooms. Barnacled with window-mounted air-conditioning units, hung with the grimy signs of defunct businesses, and haphazardly renovated, the building is pushed to the very limits of its capacity - electrically, mechanically and in terms of density.

Old China hands will tell you that Chungking Mansions has lost much of its edgy charm since its lifts were refitted five years ago, a nostalgia that seems more like a death wish when you see what the current elevators have to cope with. At 6pm on a Saturday afternoon, the queues stretch back down Chungking's fluorescent-lit tunnels. There are Indian touts and their Filipina girlfriends, exhausted backpackers, serene middle-aged American couples, don't-mess-with-me Russians and African women in voluminous printed dresses. They could be extras from Blade Runner forced into a fire drill.

At the end of the queue waits an interminable lift journey. The building has 17 floors and the elevators invariably stop at each floor on the way up and down. By the time it has creaked to the top and back, the lift looks like it might die: 10 people cram into a space meant for seven and the overload alarm lets out a mournful electronic bleat. Whereupon a portly Bangladeshi bustles through the doors and wedges himself inside as if he's performing a star jump. The alarm might now be shrieking like a gibbon - but the lift can evidently be tricked into taking more than its legal load.

In these elevators, the future lasts only as long as the ride to the floor you want. After that, the overloading is someone else's problem - until, of course, you want to go back down again.

There are 980 rooms honeycombed throughout Chungking - which means "great (or repeated) good luck" - some of them just big enough for a double bed. The guesthouses are cheap - little more than £10 a night for the most basic - but the shower usually drains directly into the toilet and the decor stretches to large white bathroom tiles on the floors, walls - everywhere. You'd be more comfortable sleeping in your own bathroom.

On any given day, the complex is estimated to be home to 4,000 residents with as many as 10,000 others milling around the scores of tailors and cheap electronic goods shops. It used to be something of a no-go area, a stalking ground for prostitutes, smugglers and drug traffickers, but has since reinvented itself as a chic, if grimy, staging post for holidaymakers to Asia. But gentrification remains a long way off: in Chungking, middle-aged budget travellers rub shoulders with Pakistani and Bangladeshi immigrants and African traders. There's a feeling that you're not in Hong Kong any more but some kind of globalised souk.

VOLUNTARY REDUNDANCY

THE PROBLEM

The company where I've worked for eight years has hit hard times and announced a generous voluntary redundancy scheme. Even though I don't want to leave and have a family to support, it seems stupid not to apply. If I'm turned down, it'll mean my job is deemed essential and I'll be safe from future cuts. If I am accepted, it is surely best to be one of the first out, before the market is flooded by all those who have been kicked out compulsorily. Or am I missing something?

Manager, male, 42


LUCY'S ANSWER


Yes, you are missing something. You are assuming that companies are consistent in deciding who to keep and who to chuck. Just because you get turned down for voluntary redundancy this time does not mean that you will be safe next time. It is perfectly possible to be deemed essential one minute and cast on to the scrap heap the next.

To offer yourself for voluntary redundancy as a tactical move would be madness. You say you don't want to leave your job, and that you need the money. In that case, the only reason to put yourself forward would be if the pay-off were so large that it would more than cover you while you found another job.

But I can't see how this could be. If you have been in the job for eight years you will probably get about a year's money.

It easily could take you that long to find something else good. Most companies are barely hiring at all, and so unless you want to work in the public sector you may have a long wait ahead of you.

I know two people of roughly your age who took voluntary redundancy a bit over a year ago. Neither has found a full-time job and both are trying to keep busy with a bit of consulting here and there.

I also think it is a mistake to assume that you are bound to lose your job at some point. Unless the company is going to go bankrupt, some people will survive; I'd concentrate on making sure that I was one of them. That means keeping your head well down and trying to look essential. This is quite tedious, as it not only involves working hard but being seen to work hard. It may be grim busting a gut to look so keen but it's not as grim as touting your CV around companies that don't want to know.


YOUR ADVICE

Work's reward


Twelve months ago I applied for voluntary redundancy but was turned down. Few of the people who took it have found better jobs, while those of us who were rejected have more work to do. But morale is better as we have a true sense of our organisation's appreciation of our individual contributions.

Manager, male, 34


Take it


Take the money and run. Anybody hiring right now will be in a stronger position than your company, and the money will give you a cushion to allow you to become more selective. If you wait for doomsday, you may be forced to jump into something you utterly dislike or take a step down.

Anon, male


Stay out


If you take the redundancy, you'll be spending more time with your wife and kids, and that's the last thing I'd want. Keep the job.

Anon, male


Start an MBA


Take the redundancy and blow the cash on an MBA. If you're going to be unemployed you might as well be unemployed and overqualified.

Banker, male, 44


Fight on


Soldiers learn it soon: never volunteer; keep your guard up; keep your rifle clean, and protect what you have.

MD, male

HONDA SETS SIGHTS ON US GREEN CAR MARKET

Honda Motor is to offer US drivers the first petrol-electric hybrid vehicle priced at under $20,000 as it seeks to draw recession-hit buyers away from the segment- leading Toyota Prius.

Honda's Insight, which will go on sale in the US this month, has already scored an early success in Japan, where 18,000 people placed orders for the car in the three weeks after it went on sale on February 6.

That was more than triple Honda's monthly sales estimate of 5,000 units, and came in spite of a drop in Japanese car sales of 24 per cent in February.

Honda published the Insight's US sticker price for the first time this week. At $19,800 for the basic model, the car will be $2,200 cheaper than the least expensive Prius.

The fully loaded LX model will cost $23,100, compared with $27,765 for the top-end Touring version of Toyota's car.

Honda, Japan's second-largest carmaker, has staked its reputation on the success of its hybrid programme, one of the areas it has spared from deep cost costs amid the motor industry slump.

The five-door Insight succeeds a three-door model of the same name which Honda discontinued in 2006.

Honda executives believed at the time that the pool of drivers willing to pay as much as $5,000 extra for a hybrid powertrain was too small, only to watch Prius sales explode as petrol prices hit record highs two years later.

“Honda absolutely cannot afford to fail with this car,” Masatoshi Nishimoto, analyst at CSM Worldwide, a motor industry research group, said.

The company is targeting sales of 200,000 units a year once production hits full stride, with most demand expected to come from the US, the biggest hybrid market.

Honda hopes planned hybrid versions of several other models, including the Fit subcompact, will push sales to 500,000 units early in the next decade, a volume equivalent to about 10 per cent of its current production.

Honda has reduced costs by engineering a simpler version of the dual engine-and-motor system that powers the car.

The Insight is less fuel-efficient than the Prius, in spite of being a slightly smaller car, generating 41 miles per gallon of petrol according to its US specifications compared with 46 mpg for Toyota. A planned upate of the Prius this year is expected to raise its efficiency further, to as much as 50mpg.

Welch denounces profits obsession

Jack Welch, the executive regarded as the father of the “shareholder value” movement, has said that the obsession with short-term profits and share-price gains that has dominated the corporate world for more than 20 years was “a dumb idea”.

The former General Electric chief told the Financial Times the emphasis that executives and investors had put on shareholder value since he spelt it out in an 1981 speech was misplaced.

Mr Welch, whose record at GE helped make shareholder value popular, said that it was wrong for managers and investors to set consistent earnings growth and steady share price increases as their overarching goal.

“On the face of it, shareholder value is the dumbest idea in the world,” he said. “Shareholder value is a result, not a strategy. . . Your main constituencies are your employees, your customers and your products.”

Mr Welch spoke before yesterday's news that GE, which he left in 2001, had lost its triple A rating from Standard & Poor's.

His comments, made in an interview for the FT's series on the future of capitalism, come as the economic crisis has caused a radical rethinking by many leading executives and policymakers.

Alan Greenspan, former chairman of the Federal Reserve and a high priest of laisser-faire capitalism, told the FT last month that the US might have to nationalise some banks on a temporary basis to fix the financial system.

The birth of the shareholder value movement is commonly traced to a speech Mr Welch gave at New York's Pierre hotel in 1981, shortly after taking the helm at GE.

In the speech, titled “Growing Fast in a Slow-Growth Economy”, Mr Welch outlined his beliefs in selling underperforming businesses and aggressively cutting costs to deliver consistent profit rises that would oustrip global economic growth.

GE “will be the locomotive pulling the GNP, not the caboose following it”, he was quoted as saying.

Mr Welch last week said that he never meant to suggest that setting, and meeting, profit expectations quarter after quarter in an effort to boost a company's share price should be the main goal of executives.

“It is a dumb idea,” he said. “The idea that shareholder value is a strategy is insane. It is the product of your combined efforts – from the management to the employees”.

Asked to comment about recent remarks by Jeff Immelt, his successor at GE, that “anybody could run a business in the 1990s. A dog could have run a business”, Mr Welch said he agreed with the concept because economic conditions were better.

“It was an easier time to be a CEO in the 1990s,” he said. “The wind was on our backs. Up until 2007, this was easy. Now it is really difficult”.

Japan backs US push for action rather than regulation at G20

Japan yesterday threw its weight behind US efforts to ensure next month's G20 summit focuses on the need for immediate co-ordinated action to support the world economy rather than long-term efforts to improve financial sector regulation.

In an interview with the Financial Times that highlighted the growing rift in the G20 ahead of today's pre-summit meeting of finance ministers, Kaoru Yosano, Japan's finance minister, said he understood the European-led push to focus on tightening financial regulation. But he suggested such issues appeared cosmetic compared to more pressing economic problems.

“We all agree [on the need for better financial regulation], but I personally feel: are these actions necessary at a time of crisis? What we ask at this moment, is to save the life of the world economy. Not to comment about its beard,” said Mr Yosano, who is also Japan's minister for economic and fiscal policy.

His comments come amid a lively fierce transatlantic debate about what the G20's priorities should be at its April 2 summit and the degree to which individual countries should commit to aggressive stimulus action.

Tim Geithner, US Treasury secretary, on Wednesday called for the world's biggest industrialised countries to commit to spending 2 per cent of their gross domestic product this year and next to stimulate the global economy.

European leaders, however, argue that they have already done their part and that the debate should move forward.

At a meeting with Angela Merkel, the German chancellor, President Nicolas Sarkozy of France said Europe had “already invested a lot for the recovery”.

Christian Noyer, governor of the Banque de France, told the FT yesterday that the US needed to fix its own financial system rather than pressing other countries to come up with fresh plans.

EU sceptics reject US spending call

The leaders of France and Germany joined forces yesterday to insist that next month's G20 summit focus on tougher global financial regulations, rejecting US calls for European states to spend more on supporting growth.

Speaking after a joint meeting of their cabinets in Berlin, Angela Merkel, German chancellor, and Nicolas Sarkozy, French president, said it was crucial for the summit convened for April 2 in London to achieve “concrete results” on the regulatory front.

“In Europe, we have invested a lot into growth. The priority now is not to spend more but to put in place a system of regulation that will stop such a catastrophe from happening again,” Mr Sarkozy said.

“In Washington we agreed on principles, in London we want to see results,” he added, referring to last year's precursor G20 meeting, the first global political reaction to the financial and economic crisis.

Ms Merkel said “fiscal stimuli are important – and Europe has made its contribution in this regard – but they cannot replace the necessary regulation”.

The unusual show of harmony for two leaders whose relationship has generally been tense underlines their governments' dismay at recent suggestions from the US that the April 2 summit should focus on additional fiscal stimuli more than on regulation.

“This is the reason why we decided to speak with one voice today,” Ms Merkel said, asked about the US attitude as expressed in recent comments by Barack Obama, president, and Lawrence Summers, his economic advisor.

The Franco-German position is largely shared in the European Union. José Manuel Barroso, European Commission president, said yesterday the EU would make a “now or never” plea for stronger financial regulation at the April 2 summit and rule out more fiscal expansion to conquer the recession.