Getting Money Out of China: A Full Review
One of the most frequent questions that I have been asked by expats and Chinese in my time in China is how to get money out of China. The government wants to keep the money in RMB as this will give it more leverage. The more money it has, the more it can borrow, therefore to stimulate the economy or keep production going at a significant rate it wants to keep the money in China and in the economy. Say, this is why it wants to keep the money in China, add to this the fact the trade war has seen RMB a reduction (as of Jan 2020) of 10% against the USD. The Chinese government seems to be getting more authoritarian about China and need citizen scores as of 2019 and an I.D to do anything. Finally, the slow GDP growth and the need to print more money to stimulate the economy and having high currency in reserve to make this feasible it will only in my prediction become harder, so what are the options as we stand.
Getting Money Out of China via Hong Kong in 2020
Some expats try to get RMB out of China through Hong Kong. However, some of the methods used to do so aren’t cost-effective. Time is money, so taking a flight to Hong Kong from Shanghai, Shenyang or Beijing to get money out of China, doesn’t make much sense. Even if you live in Shenzhen, going to HK will take a day, moreover, unless you have HKID. It isn’t always easy to open up a bank account and in most cases, you need to use a money changer, which doesn’t make any sense. This is because you will be left with cash in your hand, and then you will still need to transfer the cash, and it isn’t easy or safe to change considerable amounts of money. Assuming you are reaching the 20,000RMB allowance, you could also be stopped at customs using this method. With the current troubles in Hong Kong, this option seems even more difficult than 6 months ago.
Getting money out of China via Western Union in 2020
You could also send money out of China by Western Union. You can see why this is an attractive option because Western Union has branches even in small Chinese cities. However, the fees and currency rates are terrible, meaning that you are often paying 7%-10% to send your money if you include the direct and indirect cost. Western Union only charges $15-$30 for the transfer typically but added to a bad currency rate, this an expensive option. Companies similar to Western Union might say they are commission-free, but the conversion rates are a killer. In addition to that, it isn’t always very practical to send money via Western Union. I have met countless expats in China, whose family literally had to collect the money on the other side of China.
Getting Money Out of China via Chinese Bank in 2020
Another way is via a Chinese bank account. Banks in China typically have better currency rates than Western Union and their competitors in the West. However, as a foreign national, you often have a $500 per transaction limit. This low limit, like Western Union, means it is also expensive, as even a $25 fee is 5% of the transfer, and then you have other small fees, such as the 1%-2% indirect currency charge. If you have a close Chinese friend, they can send up to $50,000 a year to you. By putting the money in their bank account, they can send money to you. The ability to spend more money at once means the fees are lower. As an example, if you send $10,000 per time, you may have a $30 one-off bank fee, add the 1%-2% exchange rate fee, indirectly it is costing you 1.3%-2.3%. If you only send $2,000-$5,000, the charges could top 3%. Ultimately, sending money to your home country isn’t always the best option and 1%-3% every time adds up. Look at it this way, If you are sending money home to contribute to a pension, you are paying 1%-3% before you add the fees for the investment. Another way to look at it is instead of investing $100,000, you may only have $97,000 to invest. If your investments go up by 10%, that is the difference between $110,000 and $106,700! Every year for 10 years, that really adds up – it could be $50,000+ compounded.
That isn’t to mention there are certain ramifications of sending too much money home. In the UK, as an example, you can only earn £3,000 from gifts each year. If you are using a Chinese friend to send money on your behalf, this may be considered a gift. Even though they are essentially using your money, as you are just using them as a gateway to funnel your own money into the country, their name will appear as the sender. Many banks automatically inform HMRC about any payments above £5,000 Sterling or any potential suspicious payments, even if you haven’t done anything wrong, too many payments from overseas gets flagged. You may, therefore, need to prove you are really an expat to avoid tax on the money. Australians, Canadians and many other expats face similar issues. Another issue with Chinese banks is, they often refuse to send money outside of China if you are paying for something which isn’t in your name. In other words, if you want to pay for a deposit on a house or anything else that isn’t a bank or investment account in your name, you might be refused.
Sending Money Out of China via Bitcoin in 2020
Bitcoin might not have the best reputation in the world, but it is possible to send money out of China using Bitcoin. Needless to say, however, the highly volatile nature of bitcoin, which can fluctuate by 25% in a day, means that it shouldn’t be used to transfer money overseas. Moreover, the Chinese Government is cracking down on Bitcoin payments. In 2017, they banned Bitcoin exchanges, meaning it is difficult to buy and sell Bitcoin in RMB. After the ban, some people have stated some peer-to-peer exchanges to get around the ban. The process isn’t easy, however, the coins are still too volatile to use to exchange money without significant losses being a possibility.
Sending Money Out of China via PayPal in 2020
PayPal is one of the oldest methods for sending money out of China. It is a viable option, but the fees are once again the big issue. There are also many processes involved here, like setting up a separate Chinese PayPal account. This PayPal account should be linked to your Chinese bank account. You can then send money from your Chinese PayPal to your UK or US PayPal, although there are several steps you need to take to make this happen. The total fees can be high because you are paying for the international transfer (typically 0.5%-2%) plus the currency conversion.
Sending Money Out via Investing in 2020
A better option is to invest overseas in USD, Euros or Pounds when you are living offshore. In the same way that ISAs were originally designed for UK nationals living in the UK to save and invest in a tax-efficient way, the UK overseas territories like the Isle of Man were originally designed to allow expats to invest whilst they live overseas. Expats living overseas have options available to them from locations such as Hong Kong and the Isle of Man, which are much cheaper than other options they have in China and especially cheaper than incurring the costs of sending money home via one of the aforementioned vehicles. This is particularly a great option for expats who have a visa and other international cards because often the premiums can be taken out from RMB and converted to USD or GBP. Another advantage of this option is speed. I have helped clients set up accounts in 48-72 hours, and all the documents can be done online.
Property For Getting Money Out of China in 2020
Many Chinese and expats living in mainland China are interested in property in the US, UK, and many other countries. There are a few currency companies I am aware of that have excellent currency exchange rates for people who are looking to send money out of China in a lump sum. Given the fees involved, however, this option is only good for people who have 40,000GBP (about $55,000) or more to send as a lump sum. Using a currency company for monthly investments isn’t a viable option.
Getting Money Out of China for Chinese in 2020
For returning Chinese with foreign passports, it is often easy to get money out of the country. Ultimately, China doesn’t allow joint passports. So returnee Chinese with foreign passports are legally expats, even though they were born in China.
For local Chinese, as mentioned previously, it is possible to send $50,000 worth out of China in a lump sum. All such accounts can be done online or via physical application forms, with some of the larger institutions that are available through brokers .
For Chinese people who want to invest more than $50,000, one of the most effective ways is to invest a further $500-$700 a month through a regular savings plan. The reason why this is effective, is that the money is taken out of RMB and put into a USD account. Therefore, it seems more like a bill payment, rather than an investment. It is only when premiums become much higher that the banks start asking questions and/or the credit or debit card limit has been reached. With that being said, it is much easier to send money outside of China using Visa or MasterCard, than UnionPay. The majority of Chinese sending money outside of China are middle-class consumers who have access to these international credit and debit cards. Some Chinese people are worried about their information automatically being shared with the Chinese tax authorities, and the rules being applied retrospectively. In other words, in 2020 the laws are changed to only allow Chinese people to spend $40,000 overseas, and the Chinese authorities apply a retrospective tax to people who used the previously $50,000 allowance. This is unlikely to be an issue as some offshore US territories do not share tax information.
As a final comment, I would say that the situation is different for businesses. Businesses that want to repatriate their capital outside of China can do it using various ways. It isn’t simple, but more options exist compared to those options available to individuals.
