In China, you don’t have the NSA, or 401(k)’s, or Superannuations. So, when planning your finances, you’re all on your own with little or no help from China or your motherland. Hence,it gets better to know the tips for staying financially secure in China.
1. Wealth Protection
This involves insurance, particularly medical insurance. Once you have created your wealth, the last thing you want to do is loose it. Let’s say you’ve accumulated a bit of money, but then get in a traffic accident or get diagnosed with a severe medical condition. An accident or illness can set you back hundreds of thousands of RMB – especially when using expensive expat hospitals – thus wiping out your savings. But by having just basic inpatient coverage, your insurance provider will cover all the medical bills to help preserve the wealth you’ve amassed.
2. Investing
Just in the way insurance preserves the money you’ve made, investing grows it. Banks in China (and practically all over the world) provide very low interest rates – barley enough to keep up with inflation. Why not invest in funds that grow your hard-earned cash faster? For example, if your investment grows at a rate of 10% per year, due to the magical powers of compound interest you will double your money in just seven years! Furthermore, there are many tax-efficient investments available exclusively for expats.
3. Banking
Remember, all banks in China are controlled by the government. Thus, you may want to be careful with how much money you stash with them. A general rule is don’t store what you can’t afford to lose – it’s definitely not recommended to have your entire savings in one Chinese bank. A better option could be offshore banking. By placing some of your savings offshore in a secure/regulated jurisdiction (while leaving a bit in your Mainland bank for spending money), you can rest assured that your wealth is in a safe place.
4. Currency Transfers
Speaking of banks… There’s enough red tape in Chinese banks to stretch the length of the Great Wall! Getting money out of China can be a treacherous process. But why? Well, the government is limiting capital outflows. For this reason, you can only exchange up to the equivalent of $500 USD per day, while foreigners are only permitted to transfer up to $50,000 per year out of the country (though you’ll need pay slips from your company, ID, and loads of other documents to do this). If you’re looking to convert and/or transfer a lot of money abroad, consider using a professional currency transferring agency. It’s by far the easiest and most efficient way to move money across international borders.
5. Tax Planning
This is especially true for Americans, but also for others who have tax liabilities in their home countries. Americans are subject to report and pay taxes on their income worldwide even if they reside outside of the US. If you’re not reporting your earnings and bank details to the IRS, you can land yourself into some serious trouble and lose all of that money in fines! If you’re a US citizen, or are liable for taxes back home, it’s highly recommended to hire a professional to help file your yearly reports in a legal fashion. It could save you a lot in the long run.
6. Retirement Planning
Most pension funds require that you live in or work in the country of where the retirement fund is domiciled. So, if you’re living in China, it may be impossible to keep that fund growing. If this is the case, did you know you can transfer your pension to a provider that will allow you to not only grow but access your funds outside of your home country? Owners of US-based IRAs and 401(k)’s, and those with British pensions, are just some of the approved pension schemes that can be transferred over. If you don’t transfer your pension, it’ll literally just sit there collecting dust, so get that money which is rightfully yours back into your possession!
7. Investing in Chinese Stocks & Property
Investing in China is not only very tricky due to extreme regulations, it’s also quite risky. In fact, the company I work for does not permit we do any investments in China: property, stocks, bonds… all are off limits. While I personally recommend against investing in China at the moment, there are other companies out there that do focus on Middle Kingdom markets that you could consult with in case you need a bit of ultra-risk in your portfolio.
Before investing here, however, you’ll definitely want to take a few points into consideration.
• China’s property market is clearly in a bubble. Even though it’s been in a bubble for years and it still hasn’t burst, that just makes this scenario even more horrifying.
• Bonds too have seen better days… The risk of default on Chinese bonds have continued to rise, and they’ll probably stay that way as long as China’s debt keeps mounting. Furthermore, China’s inflation spells also bad news for bonds.
As an expat there are tremendous opportunities to add zeros to your bank account. But if you’re not managing your wealth properly to actively grow and protect your savings, are you truly maximizing your full potential?
Contact us
If you have further inquiries, please do not hesitate to contact Tannet at anytime, anywhere by simply visiting Tannet’s website english.tannet-group.com or www.tannet-group.net, or calling Shenzhen hotline at 86-755-82143422 or Hong Kong hotline at 852-27826888, or emailing to tannet-solution@hotmail.com. You are also welcome to visit our office situated in 16/F, Taiyangdao Bldg 2020,Dongmen Rd South, Luohu, Shenzhen, China.
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