investing in rmb

[ÉÙÁÖ]

What's the best way for a U.S. citizen to invest in RMB with USD? I have heard there are restrictions on who can open RMB accounts, also on how much you can transfer in and out. Anyone have some experience?

[Amaro]

Not sure if this would help you. You can try this website http://www.xe.com/

[GDBILL]

What's the best way for a U.S. citizen to invest in RMB with USD? I have heard there are restrictions on who can open RMB accounts, also on how much you can transfer in and out. Anyone have some experience?

 

If you are physically in China and have valid ID, anybody can open a bank account without restrictions.

 

There is no limit to how much foreign currency you can transfer into China, but there is a $50k per year limit on:

 

1. Exchange of foreign currency into RMB; and

2. Exchange of RMB into foreign currency; and

3. Wiring foreign currency out of China.

 

There are exceptions to the limits, above, most notably for investment in real estate. It seems, however, that real estate investment as a way to leverage the rise of the RMB is no longer attractive. Seems that ship has sailed.

[Tony_onrock]

There is also a limit of transfer to 5 accounts from each offshore account. This is to curb people like me who use friends and relatives to convert 50k US a year. But you can still use multiple offshore accounts and tranfer to 250k total (5x 50k) for each account. To get money out, you can do the reverse or use other means to convert out. Once the money is in, there are some pretty conservative investment products such as libor linked (2.65% /yr for one to three months terms, interest and principal guaranteed, or longer term trust company products that give you about 6% yield). Real estate may be a good buy at year end or beginning of next year (right before Chinese New Year when developers have real tight cash flow problems), but right now it is too risky.

[GDBILL]

There is also a limit of transfer to 5 accounts from each offshore account. This is to curb people like me who use friends and relatives to convert 50k US a year. But you can still use multiple offshore accounts and tranfer to 250k total (5x 50k) for each account. To get money out, you can do the reverse or use other means to convert out. Once the money is in, there are some pretty conservative investment products such as libor linked (2.65% /yr for one to three months terms, interest and principal guaranteed, or longer term trust company products that give you about 6% yield). Real estate may be a good buy at year end or beginning of next year (right before Chinese New Year when developers have real tight cash flow problems), but right now it is too risky.

 

 

What do you mean?

[2mike&jin]

There is also a limit of transfer to 5 accounts from each offshore account. This is to curb people like me who use friends and relatives to convert 50k US a year. But you can still use multiple offshore accounts and tranfer to 250k total (5x 50k) for each account. To get money out, you can do the reverse or use other means to convert out. Once the money is in, there are some pretty conservative investment products such as libor linked (2.65% /yr for one to three months terms, interest and principal guaranteed, or longer term trust company products that give you about 6% yield). Real estate may be a good buy at year end or beginning of next year (right before Chinese New Year when developers have real tight cash flow problems), but right now it is too risky.

 

 

Tony - not only what do you mean - but I was under the impression that "1 person" could only transfer out of country or convert $50K USD per calendar year. Could you straighten me out on this please?

 

Why I think this: When I lived in China, albeit it was 2 years ago, I spent considerable time discussing this with BOC and HSBC. Essentially, they told me that there is a banking/Gov't computer system they must check each time that they convert or transfer money from-into USD - and that each person is limited to the $50k, per calendar year. Both HSBC & BOC (Premier and BOC Great Wall accounts) told me the same thing.

 

Additionally, two days ago I listed my house in Hawaii for sale - and the real estate lady - relayed a story of a Chinese guy who owns a Coal Mine - just bought a house in our building - and he had to get "lot's" of people to send/convert RMB to USD. She essentially said it took them almost a month to get the USD $1M here to buy the place. I was surprised at this as I would've thought a businessman could've found a way to circumvent the system. She also indicated it was almost as hard for him when he bought a place in Vancouver as well. News to me.

 

Thanks.

Edited July 1, 2010 by 2mike&jin (see edit history)

[GDBILL]

There is also a limit of transfer to 5 accounts from each offshore account. This is to curb people like me who use friends and relatives to convert 50k US a year. But you can still use multiple offshore accounts and tranfer to 250k total (5x 50k) for each account. To get money out, you can do the reverse or use other means to convert out. Once the money is in, there are some pretty conservative investment products such as libor linked (2.65% /yr for one to three months terms, interest and principal guaranteed, or longer term trust company products that give you about 6% yield). Real estate may be a good buy at year end or beginning of next year (right before Chinese New Year when developers have real tight cash flow problems), but right now it is too risky.

 

 

Tony - not only what do you mean - but I was under the impression that "1 person" could only transfer out of country or convert $50K USD per calendar year. Could you straighten me out on this please?

 

Why I think this: When I lived in China, albeit it was 2 years ago, I spent considerable time discussing this with BOC and HSBC. Essentially, they told me that there is a banking/Gov't computer system they must check each time that they convert or transfer money from-into USD - and that each person is limited to the $50k, per calendar year. Both HSBC & BOC (Premier and BOC Great Wall accounts) told me the same thing.

 

Additionally, two days ago I listed my house in Hawaii for sale - and the real estate lady - relayed a story of a Chinese guy who owns a Coal Mine - just bought a house in our building - and he had to get "lot's" of people to send/convert RMB to USD. She essentially said it took them almost a month to get the USD $1M here to buy the place. I was surprised at this as I would've thought a businessman could've found a way to circumvent the system. She also indicated it was almost as hard for him when he bought a place in Vancouver as well. News to me.

 

Thanks.

 

You are right about the online system. The State Administration of Foreign Exchange has a computer system which all banks must utilize when conducting foreign exchange operations. Unless the SAFE system ok's the transaction, there can be no exchange. It is updated in realtime so if you buy, say, $50k at ICBC and walk across the street to Bank of China they will see it in their system and decline the transaction.

 

There is a similar system for outgoing wire transfers. Incoming is no problem.

[Tony_onrock]

True. One person can only convert 50K per year. 10 people can 50x10, half a million/yr. So after they linked all the banks online, people start using 10, 20 people to help convert by sending 50kUS to each friends and relative and then after conversion, have the money send to him or her in the PRC bank account.

End of last year, BOC said, there is a limit. You can only send up to 5 people from an offshore account a year to convert. Say if you send to 10 people, the other 5's application to convert may be denied. But they only track the account number of the sender. If you have two or three separate accounts offshore, you can send to 5 people from each account and have them help you convert.

On the way out, there is also the same 50K USD conversion limit, but you can also use multiple people to help.

Larger amounts can be done through swap, arranged, sometimes by your private banker to match outward and inward remittance needs. I would certainly avoid the latter, as it is in violation of the foreign exchange rules.

One legal way to get money in and out for large, large amounts is through banks, called Nei Bao Wai Dai, through company.

This is how it work: you have a PRC business, say with 100 million RMB cash and no book profit yet. You deposit this 100 million with a PRC bank, which will issue a standby letter of credit in favor of your PRC company's offshore subsidiary. The subsidiary borrows against this LC in the same amount of deposit in USD. When the RMB is free to be remitted out, the thing is reversed. The standby LC is registered with state administration of foreign exchange (SAFE) and follow the procedure set up by SAFE, so it is perfectly legal. The cost is quite reasonable at present. Only limit is the bank's quota for this. Some banks have bigger quota and some have a small quota or none. But getting 300 to 500 million RMB out should not be that difficult.

If you default on the offshore loan, your RMB is taken by the bank.

[Tony_onrock]

Getting the money in and convert into RMB using something similar was OK before, but POBC put a stop to it in 2007 in the last round of curbing foreign investment in real esate in China and did warn/fine a coulple of banks that was active in doing these.

Conduit loan is not a new concept. In the US, before IRS put a stop to it, it was used quite commonly to get treaty benefits.

In PRC, other than foreign exchange control, conduit loan also has tax benefits. Interest income, for manufacturing companies, through shareholder loan is subject to 10% (7% in case of HK) withholding tax, yet inter bank loan (brach to parent or vise versa) is exempt from withholding. But banks have a quota limit on how much inter bank loan.

 

Pleaes note that the above is a general discussion and I am not telling any one what to do or not to do.

[GDBILL]

True. One person can only convert 50K per year. 10 people can 50x10, half a million/yr. So after they linked all the banks online, people start using 10, 20 people to help convert by sending 50kUS to each friends and relative and then after conversion, have the money send to him or her in the PRC bank account.

End of last year, BOC said, there is a limit. You can only send up to 5 people from an offshore account a year to convert. Say if you send to 10 people, the other 5's application to convert may be denied. But they only track the account number of the sender. If you have two or three separate accounts offshore, you can send to 5 people from each account and have them help you convert.

On the way out, there is also the same 50K USD conversion limit, but you can also use multiple people to help.

Larger amounts can be done through swap, arranged, sometimes by your private banker to match outward and inward remittance needs. I would certainly avoid the latter, as it is in violation of the foreign exchange rules.

One legal way to get money in and out for large, large amounts is through banks, called Nei Bao Wai Dai, through company.

This is how it work: you have a PRC business, say with 100 million RMB cash and no book profit yet. You deposit this 100 million with a PRC bank, which will issue a standby letter of credit in favor of your PRC company's offshore subsidiary. The subsidiary borrows against this LC in the same amount of deposit in USD. When the RMB is free to be remitted out, the thing is reversed. The standby LC is registered with state administration of foreign exchange (SAFE) and follow the procedure set up by SAFE, so it is perfectly legal. The cost is quite reasonable at present. Only limit is the bank's quota for this. Some banks have bigger quota and some have a small quota or none. But getting 300 to 500 million RMB out should not be that difficult.

If you default on the offshore loan, your RMB is taken by the bank.

 

I'm still confused.

 

Are you saying that I can only wire money out to six different overseas accounts?

 

Or that only 6 people in China can wire money to the same overseas account?

 

Or that only up to 6 people in China can receive money from the same overseas bank account?

 

 

ICBC just opened up overseas mortgages in US$, for what it's worth. I might take them up on one.

[ÉÙÁÖ]

What's the best way for a U.S. citizen to invest in RMB with USD? I have heard there are restrictions on who can open RMB accounts, also on how much you can transfer in and out. Anyone have some experience?

 

If you are physically in China and have valid ID, anybody can open a bank account without restrictions.

 

There is no limit to how much foreign currency you can transfer into China, but there is a $50k per year limit on:

 

1. Exchange of foreign currency into RMB; and

2. Exchange of RMB into foreign currency; and

3. Wiring foreign currency out of China.

 

There are exceptions to the limits, above, most notably for investment in real estate. It seems, however, that real estate investment as a way to leverage the rise of the RMB is no longer attractive. Seems that ship has sailed.

What can someone without a valid ID do?

[GDBILL]

What's the best way for a U.S. citizen to invest in RMB with USD? I have heard there are restrictions on who can open RMB accounts, also on how much you can transfer in and out. Anyone have some experience?

 

If you are physically in China and have valid ID, anybody can open a bank account without restrictions.

 

There is no limit to how much foreign currency you can transfer into China, but there is a $50k per year limit on:

 

1. Exchange of foreign currency into RMB; and

2. Exchange of RMB into foreign currency; and

3. Wiring foreign currency out of China.

 

There are exceptions to the limits, above, most notably for investment in real estate. It seems, however, that real estate investment as a way to leverage the rise of the RMB is no longer attractive. Seems that ship has sailed.

What can someone without a valid ID do?

 

Nothing. Absolutely nothing.

 

Banks are quite strict with ID and they check every ID card in the Ministry of Public Security database when you open an account.

 

You must have either a Chinese ID card, valid passport, valid military ID or a Chinese hukou book.

[2mike&jin]

True. One person can only convert 50K per year. 10 people can 50x10, half a million/yr. So after they linked all the banks online, people start using 10, 20 people to help convert by sending 50kUS to each friends and relative and then after conversion, have the money send to him or her in the PRC bank account.

End of last year, BOC said, there is a limit. You can only send up to 5 people from an offshore account a year to convert. Say if you send to 10 people, the other 5's application to convert may be denied. But they only track the account number of the sender. If you have two or three separate accounts offshore, you can send to 5 people from each account and have them help you convert.

On the way out, there is also the same 50K USD conversion limit, but you can also use multiple people to help.

Larger amounts can be done through swap, arranged, sometimes by your private banker to match outward and inward remittance needs. I would certainly avoid the latter, as it is in violation of the foreign exchange rules.

One legal way to get money in and out for large, large amounts is through banks, called Nei Bao Wai Dai, through company.

This is how it work: you have a PRC business, say with 100 million RMB cash and no book profit yet. You deposit this 100 million with a PRC bank, which will issue a standby letter of credit in favor of your PRC company's offshore subsidiary. The subsidiary borrows against this LC in the same amount of deposit in USD. When the RMB is free to be remitted out, the thing is reversed. The standby LC is registered with state administration of foreign exchange (SAFE) and follow the procedure set up by SAFE, so it is perfectly legal. The cost is quite reasonable at present. Only limit is the bank's quota for this. Some banks have bigger quota and some have a small quota or none. But getting 300 to 500 million RMB out should not be that difficult.

If you default on the offshore loan, your RMB is taken by the bank.

 

 

Thanks Tony - for the information - good to know.

 

Additionally, when I was bumping into this issue when I lived in China - I realized - that I could get RMB another way - albeit slowly. I had three bank cards - two of which "reimburse me for ATM fees", so I could essentially convert - and withdraw 9000 RMB per day. (I realize if I opened a BofA account - I could do it free as well with CC....Bank as well - but I was ok with the 6000/or/9000 RMB a day.) In theory - I could open a couple of BofA accounts and the existing ones I had - now with my wifes separate accounts/cards I could run about 24,000 RMB a day - quickly adding up to serious money - with the only cost being the currency conversion by the card company - something I saw as equal to the BOC charges for conversion. However - a lot of work - and once it's in the bank in China - you have the same problems bringing it BACK!

 

I think if I really wanted to pile on the RMB - I would use a Forex account or some such account to try to avail myself to the rate change. As I remember there were 2 or 3 CFL'rs that not only had play accounts but were developing algorithms to do "instant trades" to hedge the daily changes in the financial markets. Not my cup of tea - but a buy and hold strategy in a long term exchange play might be viable...however I have never "seriously considered it" always - worried about "How Much I don't know" and "Insider manipulation" that always kills the profits.

[knloregon]

Mike,

 

Don't know how it is now, but when we were seriously considering money transfers and conversions as you suggested three years ago, we were advised against it. Creates a very serious money trail, and invites scrutiny from bank examiners. It may be legal, but this is China---appearances matter too, and bank examiners need to prove their existence, particularly, if their institutions many not be entirely on the up & up with much lager clients.

[2mike&jin]

Mike,

 

Don't know how it is now, but when we were seriously considering money transfers and conversions as you suggested three years ago, we were advised against it. Creates a very serious money trail, and invites scrutiny from bank examiners. It may be legal, but this is China---appearances matter too, and bank examiners need to prove their existence, particularly, if their institutions many not be entirely on the up & up with much lager clients.

 

 

You're absolutely correct. When I was considering "upgrading" Jin's car to a TANK - for safety (Toyota Land Cruiser) I talked with the BOC VP about the restrictions. He basically said bringing money in to purchase something - i.e. a house or car or business - was NO problem and they could actually convert USD to RMB for that purpose, in excess of the $50K USD a year restriction. The issue was getting it back out. He said that "at that time" there was no method to "reverse" the process - i.e. sell house - convert all the money to USD at once and move back to the US. This issue, the repatriation of the money, was what caused me not to buy investment properties or spend money on something that I might not have gotten any use out of.

 

I also did lightly touch on the issue that you brought up - tracking inflows and outflows - his position, and my eventual position, was that "legal activities" such as Real Estate investments, advantages in RMB-USD rates, China CD's, Stock market, and legitimate businesses - all properly documented would not in any way cause the Bank or the individual problems. Sort of like in the US. Unfortunately, it's always not easy to know what is a legal investment/business in China - part of my decision to not do anything other than enjoy my fiance/now wife, food and my attempt to learn to speak Mandarin!