Banking in China – challenges and rewards

11 Mar

While China’s economy has been slowing lately, it is still expected to grow at over 7% this year from reports that I’ve seen.  Inflation alone for 2011 was over 5% for parts of the year with certain food prices increasing at a much faster pace.  I did a presentation last year where I presented economic statistics to the audience – GDP growth, inflation, salary increases, turnover – and then I dissolve all the statistics into two photos – one of a pig – to represent the increases in the price of pork – and the second is a house – to represent ever increasing home prices.  The central government is fighting inflation and housing prices and at the moment, both appear to be relatively under control – housing prices have even dropped slightly and they are considering dropping some controls in certain areas.

As a foreigner in China, there are certain aspects of the banking system and overall financial system that I participate in and others that I do not.  I have two bank accounts, a debit card, frequent flier card, even a credit card (which was initially facilitated by my employer after six months of trying myself and is not that common for foreigners), but I don’t do trading of stocks, nor am considering purchasing property.  I think it may be possible, but I’m not comfortable with the level of risk or pricing of real estate in Shanghai at this point.

Bank deposit rates for short term CDs are over 4% and recently I found a three and a half month CD with a 5% annualized return.  Luckily to invest in these all you need to have is a bank account with RMB and the ability to not touch your money for that period of time, both of which I can meet for a while.  The other day we spent a morning at the bank, going through the process of filling out the forms and confirming the product type.  The hardest part is that I have to write a sentence in Chinese saying that I understand the risks of the product.  The bank is pretty strict about the fact that I need to write it myself but doesn’t seem to care that my writing makes me look like a third grader – so I had to carefully copy it.

Banking also has other challenges here.  You pay most bills in cash – including my credit card bill, my utility bills, etc.  Checks do not exist.  Things are either direct deposit (like a your monthly salary) or cash.  Once I tried to do online banking – but my Chinese needs to be a whole lot better before that is ever going to happen for real, plus I’m not quite sure I trust the security of the website itself.

An army of bank employees waiting to serve me

The other interesting part of banking is the status that you get from having different cards.  In theory, being a gold member means that you don’t have to wait in the same line as everyone else and can even get you into airport lounges and discounts on all types of products.  Previous to six months ago, I hadn’t been in a bank in a couple of years except to pay my credit card bill which you do in a cash deposit machine.  At that point when I asked some questions about my account they said that I was eligible to become a gold member.  I have yet to experience any of the benefits they promised.  I think there must be a hidden caveat somewhere.

All said and done though, the RMB (Chinese yuan)  is steadily becoming more valuable against the USD – from around $1 = 7RMB when I first came four and a half years ago, to $1 = 6.3 RMB now.  I’m hoping it continues.  I know for those of you who visit me, that means it’s more expensive – but when I go back to the States I’ll treat!


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