investing in rmb

[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.

 

 

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!

 

 

Using fee-free relationships between, say, Bank of America and China Construction Bank is one way to avoid the $50k annual conversion limits. Another way is to use the money changers commonly found near most major branches of Bank of China. Yes, there is some risk, but it is usually minimal.

 

What most major multi-national companies in China do to get forex for staff overseas travel is to use a trusted money changer. You call them, they come to your office and conduct the transaction. Again, very minimal risk.

[GDBILL]

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!

 

 

If you sell real estate you can now get approval from SAFE to convert your RMB into foreign currency without limit. You do need to provide documentation which makes it extremely difficult to game the system.

[Tony_onrock]

RMB deposit to back up LC and then offshore borrowing in USD is a legally recognized means of providing financing for PRC company overseas expansion (including WFOEs). I know most of the listed develpers do it. I know in one transaction, in the purchase of two domestic propertie by a domestic company from an offshore individual, the bank helped funnel out 1 billion RMB out in a single day on closing.

There are rules and there are legally recognized ways to get around it. Money changer is costly and there are legal risks as it is against the law, so is swapping. But most banks are willing to do it for their private banking clients to swap in or out. I know one money changer got arrested and sentenced to serious jail term. He helped in getting the money for an port construction converted!