This post has been updated to include a note about the author. The editor would like to apologize that this was not included in the original post, leading to some uncertainty as to the article's intent.
This is a topic which is regularly discussed amongst the expat groups in China. China has currency regulations which stop the free movement of renminbi around the world. These kinds of regulations are designed to control a countries capital markets and to a certain extent stop the rich elite making their millions and leaving the country. For us expats who work here and do not fall into the category of being a rich native or a foreign speculator, then why should we fall victim of these rules?
For those of us who work here legally and pay the correct taxes the answer is “we don’t.” Contrary to popular belief, there are no daily or annual limits on the amount of money that can be transferred out of China. In order to facilitate this transaction you will need to go to your bank and prove to them that this money was earned legally and that the correct taxes have been paid. For most of us this will be satisfied by producing the following documents:
Valid identification documents
Valid employment contract
These are all relatively simple documents to obtain and you should be able to get your HR department to assist you with collecting them. Your bank will then make an application to the government regulator, known as S.A.F.E (The State Administration of Foreign Exchange) and if they feel that everything is in order then they will release your funds for foreign transfer.
Furthermore, all foreign nationals living in China are allowed to remove USD 500 per day without needing to provide any documentation, proof of ownership or records of taxes being paid.
The real problems with the removal of funds from China are for the people who work in the grey areas of the Chinese economy, which is still a considerable amount of expats. There are solutions available for people in this category but they are at best risqué and at worst illegal.
The simplest and most common way is to send your bank card/s home and have a friend or loved one withdraw the money from an ATM in your native currency. You are also allowed to leave China with cash in your pockets at the exit border points and this has been reported to be up to USD 10,000.
There are a multitude of other ways that people try to circumvent the regulations. Some people buy a resaleable asset to take back home, such as a piece of art. Others will ask their friends to transfer money for them. This is very common for those with Chinese friends as they are able to transfer up to USD 50,000 without any supporting documentation.
All of the methods detailed in the above paragraph are not advisable and skirt the laws of legality, or outright break them. Through simple planning with a tax accountant or financial advisor all of them can be avoided and dealt with in a far more effective manner.
There are foreign investment companies that will accept China UnionPay as a form of payment. The products are generally savings plans and investment platforms, which give the investor access to a broad range of mutual funds and ETF’s (Exchange Traded Funds – low cost investment vehicles). These accounts are very cost effective and remove much of the hassle with foreign currency transfers. In the eight years I have lived in China, these have to be by far the most convenient vehicle I have seen for expats to transfer money and grow their assets for the future. It is important to note that these accounts cannot just be used to remove the money from China one day and then withdrawn the following day outside of China. There are restrictions and time frames which need to be understood, and professional advice should be sought.
Why should I transfer my money and what do I do with it?
As a financial planner there are usually two questions which I am asked regarding the topic of removing money from China: Why should I send my money home? I can invest it in the Chinese stock market and make millions.
What should I do with my money when I have sent it home?
Let me tackle question 1 first. We have all come across stories of Chinese people making millions on the stock exchange. We see rich kids driving Lamborghinis who can barely see over the steering wheel and many of us have thought to ourselves “I would like a piece of the Chinese dream”. However, as expats we are only allowed to invest in B class shares in China. A class are reserved for Chinese and institutional investors.
Secondly, if you are worried about removing money from China then why would you attempt to grow this money and increase the size of your problem? The Chinese stock market is incredibly volatile and for every story you hear of someone making lots of money, there is someone losing the same amount but doing it in a far quieter fashion.
Can you honestly pick stocks and shares successfully and if you can why don’t you quit your day job and work for yourself or knock on the door of Goldman Sachs or JP Morgan and ask for a six-figure salary.
As for question 2, keep a look out for our follow-up blog.
About William Frisby
William originally arrived in Beijing as a finance guy on a bicycle and will probably leave as a finance guy on a bicycle. He works for Premium Finance Group (PFG), a financial consultancy that has been established in China for over ten years. PFG offers clients no-nonsense, personalized advice and serves the whole of China from their Beijing and Shanghai offices. Services include international property, investment, insurance and financial planning. To contact William, email email@example.com.
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