Ｂｅｉｊｉｎｇ Ｂｒａｖｅｓ ａ Ｃｏｌｄ Ｃｏｌｄ Ｗｉｎｔｅｒ

Ｂｙ　ｓｔａｆｆ　ｒｅｐｏｒｔｅｒ　ＬＵ　ＲＵＣＡＩ

BEIJING and its 16 million residents are entering an unusually chilly winter season – though the chill is more economic than climatic. Xie Jiangbo, an MBA student with the prestigious Guanghua School of Management at Peking University, knows that the big crowd of international investment banks that courted alumni before him wont appear this year, and he is ready to seek jobs in other fields. Graduates of 2009 share the fate of entering the work force at a bad time, when the world is sinking deeper into a financial crisis that has affected almost every country.

“I think the financial crisis first took its toll on the financial sector, then services and then manufacturing,” says Xie, who majored in economics and studied finance as a postgraduate. Beijings economy is increasingly based on finance and the service industries, so the crisis is hitting the capital hard.

No Safe Turf

When the impact of the financial slump was becoming clear at the end of 2008, Cherry Lin took up a job at Canon after eight months with British headhunting company Antal International. According to her experience, headhunting is a keen barometer of the economic situation. When the economy was brisk, the section where Ms. Lin worked was busy scouting talent for a swathe of big names in the fast moving consumer goods (FMCG) industry. Many of their clients were in the worlds top 500 list, such as P & G and Coca Cola.

“The most vibrant teams were accountancy and banking before the second half of 2008,” Lin recalls. The hectic stock market and real estate sector generated soaring demand for financial professionals, which brought the two sections increasing business and profits. But their ascendancy came to a grinding halt with the sudden unraveling of the financial markets. “The financial teams were grabbing FMCG clients from us. They have shed jobs and the business outlook still remains dim.” Lin says many companies have abandoned hiring plans established at the beginning of 2008 due to much diminished budgets.

The automobile and IT industries were also among the hardest hit. Even the three US auto giants have come to the brink of bankruptcy. Domestic automakers, still young in the business, face a bitter struggle for survival. As for the IT industry, it has always relied heavily on risk investment, and could not save its own skin in the financial disaster.

These factors add up to one big ice storm in the employment market, affecting a broad spectrum of job-seekers, from fresh graduates to senior managers.

Before she left Antal, Lin failed to find a new job for a marketing manager who contacted her in September. “When I first spoke to him last July, he had no desire to leave his job. After HP purchased EDS (Electronic Data Systems) the department he worked for cut 80 percent of its staff, and unfortunately he was one of them.”

Lins company predicts a turnaround in the economic situation around April or May this year. But many other firms are less optimistic.

In any case, Xie Jiangbo isnt waiting around for the economic thaw. After a hard look at the situation, he adjusted his job hunting sights from investment banks to state-owned commercial banks. “The experience of friends tells me that a job with a state-owned bank is comparatively secure.” He estimates that the number of graduates entering the financial sector will drop by 70 percent in 2009.

Employment opportunities are shrinking in almost all parts of the economy, a bleak prospect for the 6 million Chinese college graduates this year. Their lack of work experience puts them at a huge disadvantage when competing with laid-off workers, whose numbers are steadily swelling. According to the blue book on Chinas economy by the Chinese Academy of Social Sciences, the number of unemployed college graduates was around 1 million by 2008. With a new crop of graduates in sight, the figure will surely grow into an even more worrying one.

Auto Dealers Offer Big Sales

After Beijing launched a policy allowing car owners to pick the numbers on their license plates in October 2008, Tian Li thought it was time to buy a car. With RMB 100,000 from his parents and a loan of RMB 150,000 from the bank, he soon drove home a sleek Toyota Reiz. “It is easy and quick to apply for a loan, and there is no interest for two years.” The young man got the vehicle three days after filing his application.

Offers by dealers and lenders havent enticed many, however. Most people show no desire to purchase a big item with borrowed money in such uncertain economic times. As a result auto salespeople are becoming desperate, and pull out all the stops for potential customers. Tian Lis friends who accompanied him to car stores were bombarded by overly ardent agents. “With the sales pressure mounting, we cannot miss any chance,” commented one car salesman.

In 2007 the output of Chinas auto industry rose 22 percent to 8.88 million vehicles. At the beginning of 2008 insiders looked forward to seeing production hit 10 million by the end of the year, based on an expected annual growth of 13 percent. That target began to look impossible in the latter half of the year, when a slide was reported in car sales across the nation. The decline exceeded six percent in August. A minor recovery the next month couldnt reverse the overall downward trend.

Shi Zubo of Jiangling Motors Co., a leading Chinese vehicle maker, admitted that his company saw a 30 percent drop in sales in December 2008. “Losses could be more grievous with home carmakers,” he added grimly.

Jiangling Motors has joined other manufacturers in staging aggressive promotional campaigns. But customers are largely holding onto their cash. “The RMB 100,000 I put into the stock market doubled in the first half of 2008, but soon began to diminish. Only half the sum is left now,” groans Mr. Kou, a state-owned enterprise employee. He was betting share prices would reach new heights, so he could buy a better car with the extra dividends. Instead, his investment contracted to half the cars value. His wife complains that he has nothing to blame but his own greed. His family no longer has the urge or means to buy a car in the immediate future.

Estimates show that in 2007 Chinas car industry engendered RMB 600 billion worth of direct consumption, and generated RMB 300 billion in fees and taxes. Its contribution to other sectors higher and lower in the industrial chain was also huge. When car sales drop, all these other sectors are also affected.

“While buying power and consumer desires dont disappear over a short period, the problem is consumers weak confidence in the future,” explains Xu Changming, chief of the Information Resources Exploration Department of the State Information Center.

Now carmakers and dealers are pinning their hopes on a reduction or abolition of the automobile purchase tax, a proposal that has been presented to the relevant government authorities for approval. Once passed, it will become the latest bold stimulus for the ailing car industry.

Home Sales Frozen

For Chinas contemporary urban dwellers, a car and a home are the two primary benchmarks of a decent life. The latter carries more weight, as owning a house has always been equated with economic security and maturity in Chinese culture.

Li Jun, however, regrets he didnt sell his apartment earlier. “If someone offers me the price at which I bought it, I will take it without hesitation.”

In October 2007, the 92-square-meter apartment a dozen kilometers northeast of central Beijing cost him more than RMB 1.2 million, or RMB 12,500 per square meter. For a time after that Li watched with delight as home prices steadily increased in his neighborhood. But then the drop started. Now the value of his home has gone down by RMB 2,000 per square meter, but even this is meaningless in terms of the reality of the market, since there are no buyers. “I hate to say it, but I bought at the peak of the home price curve.” Li thought of selling the house when the first signs of a price drop appeared. The idea was opposed by all of his friends but one. “Given the governments tone at the time, most people didnt believe a fall in home prices would occur.”

After being assigned to a position in another city, Mr. Li leased his apartment through a real estate agency. “It is not difficult to find tenants. There are a lot of people who dont own homes in Beijing, and my property is located in a convenient commercial district.” His rent income has also spiraled downward however, from over RMB 3,000 in September 2008 to RMB 2,500 at present.

Real estate agencies are similarly feeling the pinch. Liu Weisong, a salesman with a Homelink outlet in eastern Beijing, has not struck a deal for weeks, which means he makes no more than his basic salary of just over RMB 1,000 a month. The office, formerly staffed by ten, is now half empty, and the lights are not switched on at dusk – “To save money,” explains Liu with some embarrassment. During the heat of the real estate boom the 500-meter-long street where Lius store sits was lined with around ten home agency businesses. Only three or four have survived. “There are few inquires and fewer buyers,” sighs Liu. Clients who formerly had the intention to buy are saying they wish to postpone the deal. “No buyer wants to see the price they pay plummet the next day.”

The billboard outside the store listing home prices has been updated with increasing frequency in recent months. The biggest fall has been RMB 3,000 per square meter, a 20 percent drop. In outlaying parts of the city home prices have dipped by as much as 30 to 40 percent.

What makes things worse is the rising backlog of unsold apartments across the nation. By the end of November 2008 unsold floorage climbed to 136 million square meters, or more than 1 million apartments of 100 square meters.

Regardless of loud hisses from the public, the government pushed through salvation measures for the real estate industry, mindful of possible ripple effects on other sectors such as building materials. New moves announced in the fourth quarter of 2008 included fee and tax reductions on real estate deals, and easier access to bank loans for both developers and home buyers. In addition, government-funded apartments priced below market rates for low-income urban residents can now be resold two years after their purchase date, instead of the previous five.

Shi Hanbing, a critic with eminent Shanghai Securities News, believes the adjustment in Chinas real estate industry will last at least three years, which is necessary to push bubbles out of the sector. He shares the publics opinion that sky-high home prices have far surpassed the buying power of most people in the nation, and has bitten deeply into consumption.

In 2007 the disposable income of Beijing families averaged RMB 66,000, while an average home within the Fourth Ring Road (eight kilometers from the city center) stood at RMB 18,400 per square meter. This created a housing price-income ratio of 27.8:1, far above 3-6:1 that the UN and World Bank deem reasonable. Even the ratio for homes beyond the Sixth Ring Road (15 to 20 kilometers from central Beijing) was double the UN and World Bank benchmark.

The recent fall in real estate prices has been hailed by all but those who bought their homes around the end of 2007, when prices reached their peak. Li Jun took a 30-year loan of RMB 700,000 for his apartment, paying back RMB 4,300 per month. After several cuts to interest rates by the bank, he still faces a rate of 5 percent, which means a considerable sum each month given the whopping RMB 700,000 gross. The experience of homeowners like Li has rung alarm bells for other potential buyers, convincing them the best thing to do for the moment is to sit tight.

Tips to survive hard times widely

circulated among Chinas netizens

1. Dont change your job

2. Dont start your own business

3. Dont demand a pay rise, as the pink slip is often handed first to those with the highest salaries

4. Save more in the bank, buy more state bonds, or keep deposits in two currencies

5. Never buy stocks

6. Send a remittance to your parents every month, as the less well-off are more badly affected by a poor economy

7. Dont buy a car for the time being

8. The worst times come at the end of the recession, so prepare yourself by learning one more skill

9. Dont divorce, dont have a child

10. Dont have extramarital affairs

RMB 100 a Week

A netizen with the nickname Depressed Hao has started an experiment of surviving on a frugal RMB 100 a week, and has drawn numerous participants. The rules of the experiment are: keep all living expenses within RMB 100 from Monday to Friday. Even a sum as trifling as a bus fare cannot be overlooked. Borrowing is not allowed, but free meals and lifts offered by friends are acceptable. Participants keep diaries every day, and post their daily costs online for mutual supervision. In the course of the experiment many ingenious ways of saving money have been discovered.