An Ex-pat's Financial Guide For China

Being a tech start-up founder, my natural first instincts are to focus on the tech essentials to be productive, when you hit the ground in China. But, having lived in Shanghai and traveled across China for extended periods of time, my colleagues and I couldn’t help but gather our short-list of other essential tips, especially financial and lifestyle-related.

In this post, I’ll share our collective thoughts for a financial survival guide:

1 - Before You Leave…

Go to your American (or Western) bank and make sure that they will not block your credit card transactions in China. This happened to one of my Appconomy colleagues twice when trying to pay for a hotel -- it is embarrassing, to say the least; potentially worse, if you have no cash or others with you to “bail you out” until you can pay them back.

With all of the global fraud and identity theft issues of this age, some American banks can be extra cautious about blocking payment on transactions in China. This is especially true when the transactions involve hundreds or thousands of dollars, which can be easy to do for an extended hotel stay.

In addition to informing your bank, it’s advisable to get a credit card that charges no foreign transaction fees. Most major carriers provide a premium credit card option with this $0-fee amenity. Same for the major financial services firms, like Schwab and Fidelity.

Without this foreign transaction fee waiver, every time you use your American-issued MasterCard, Visa, or other credit card, you will pay a fee with it in China. While it is just a few percent, it can add up to “real money” quickly!

2 – When You Arrive…

Set up a Chinese bank account. Like the phone companies, there are three main banking institutions in China: Bank of China, China Agricultural Bank, and International Commerce and Bank of China (ICBC). Have a Chinese friend or work colleague go with you; someone who knows both Mandarin and is familiar with banking practice in China.

There are forms to be filled out and lines to wait it in, so make sure to go at a non-peak time, when you’re not pressed by any deadlines. If you are lucky, it will take less than an hour. While there, get a debit card. You can also get a Chinese credit card; but if you have a no-fee, Western credit card, then you won’t need the Chinese one.

Ask them to set up your account so that you have mobile phone notifications turned on. Then add the bank’s number into your contact database so that you recognize them when you receive text messages. This is a useful way for you to keep track of your money, as it is being deposited or withdrawn from your account, including fees and other bank messages to account holders.

3 – Keep Your Cash Accessible

While China is the world’s second largest economy in an age of worldwide e-commerce, it is also a place where financial transactions in cash – even very large ones – are still quite common. Nothing beats cash, so it’s important for you to have as much cash as close by as possible.

A quick primer on the currency naming. You’ll hear at least three different words for the base currency: yuan, renminbi (often seen by its acronym RMB), and kuai. Think of it this way:

  • yuan RMB, is like the British currency “pounds Sterling” – the words can be used separately or together
  • kuai is a common term, like “a buck” is for “a dollar”

When you set up your Chinese bank account, you’ll have to wire the money in from the U.S. (or your country of citizenship), then go to the bank and request a transfer of funds to RMB, at whatever the prevailing exchange rate is. Fill it with a decent amount of RMB – at least 6 to 8 weeks, if you can afford it, based upon your household budget while in China.

When you are setting up your bank account or, to make your initial visit a little shorter, when you return to convert currency after receiving your first wire transfer, make sure to have the bank increase your daily ATM withdrawal limit. You never know when you will need a lot of cash and you don’t want to be prohibited from getting to it, due to an unintentionally low limit.

Finally, try to keep as much cash at home as you can handle… up to 30,000 RMB would be a good target (equivalent to roughly $5,000 USD). A mid-evening hospital emergency, or some other unplanned, non-office hours, or holiday event could (and probably will) happen, if you live in China long enough. When it does, you will want to have as much cash with you as you safely afford, just in case.

4 – Dining Differences

There are two main points to make regarding dining. First, tipping is the exception rather than the rule, when it comes to payment when dining. While there is some vigorous discussion about tipping in a few online forums and magazines, it is moreso an act of generosity than an expected supplement to the server’s wage, based on how well they waited on you.

I consider myself a pretty regular tipper, normally at the 20% level in the U.S. But, the only time I ever tipped food staff is when the delivery people brought me pizza in a pouring rain storm or a tasty burger and fries in the dead of winter.

Second, when you pay for your dining, especially if you have any intention of using it for a business-related or other tax-associated event, then you need to explicitly ask for a “fapiao."

Fapiao is the word for the official receipt for goods and services in China. You’ll know it is a fapiao because it has an official red stamp on it, denoting the merchandise/service and the amount.

If you don’t have a fapiao for a purchase, then technically “it doesn’t exist” when it comes to expense reimbursements, tax tracking, etc. I found it to be a good practice to ask for one for all, day-to-day purchases, so that I would in the habit.

5 – Caveat Emptor

The Latin phrase for “buyer beware” is definitely as applicable in China, if not more, than it is for any major economy in the world. Some tips to keep in mind, from a few experiences we encountered:

  1. There are definitely bargains to be had in China; for example, the Pearl Mart is an amazing marketplace where pearls are available, from low to high quality, at a fraction of the price elsewhere
  2. But, with bargains also comes the potential for counterfeit goods, which are omnipresent. The only sure way to get an originally manufactured item is to buy it from the store brand itself, e.g., an iPhone
  3. Taobao is another omnipresent force in commerce in China. Because nearly everything can be purchased for less and delivered just as fast (same- and next-day delivery are frequently possible), Taobao and its B2B twin – TMall – is consulted for nearly every purchase
  4. Forget about refunds & returns – as a general rule, when you buy something, you own it. There are a few exceptions, usually from Western-headquartered firms. However, a return/refund option can require an additional payment at checkout and, even then, the window of return time may be relatively short

One last financial note for ex-pats who will be in China for any extended period of months: make sure you consult a firm that has expertise in tax planning specifically for China. I’d recommend a Big Four or equivalent firm that has on-the-ground staff, as well as your America or Western contacts.

Not surprisingly, tax law is quite different in China. You don’t want to accidentally get yourself into a situation where you could owe tens of thousands of dollars to the U.S. or Chinese federal authorities, during or after your extended stay.

Next time, I’ll finish with the third in this series of posts, with a Lifestyle survival guide for ex-pats. As always, I welcome your comments and questions.

A repost From Steve Guengerich's Linkedin Post