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Preface#

Before starting, you need to know the risks that this article discusses avoiding:

• Long-term/short-term depreciation of the RMB exchange rate
• Domestic bank accounts being restricted from transfers/withdrawals
• Domestic bank failures
• Tightening of capital outflow/exchange policies
  • Some important time points in China's personal foreign exchange policy:
    • 1995: Stopped using foreign exchange coupons
    • 2001: China joined the WTO, committed to gradually relax foreign exchange controls
    • 2003: Started allowing individuals to hold foreign exchange, but purchases still had strict limits, with no clear quotas and required various proofs for approval
    • 2006: In December, the State Administration of Foreign Exchange officially announced that starting from February 1, 2007, individuals could exchange up to the equivalent of $50,000 in foreign exchange per year
    • 2016: Strengthened supervision over individual foreign exchange purchases, requiring purpose declarations, etc., and prohibited direct wire transfers to brokers
  • It can be seen that individuals have had a certain degree of freedom to exchange foreign currency from 2007 to now (2024), but only for a short 17 years.

The risks that the discussed plan cannot address:

• Inflation risk
  • Requires certain investment knowledge, which this article does not cover
• War risk
  • Referencing the Russia-Ukraine war, the global financial industry's blocking and restrictions on Russian citizens' accounts

Suitable audience:

• Individuals in China with certain savings who want to avoid the aforementioned risks
• Those planning to emigrate within a certain period and want to move funds abroad during the preparation phase

Unsuitable audience:

• Those who believe the RMB exchange rate will rise in the long term
• Those with large domestic expenditure plans in the future, such as purchasing real estate
• Those needing to transfer assets exceeding 3 million RMB

Statement:
With the imminent interest rate cuts in the U.S., I do not know how the exchange rate will change in the future. This article only shares some personal thoughts, and everyone bears their own risks.

Plan Discussion#

In response to the above risks, several plans generally come to mind:

🔒 Domestic bank RMB deposits/investments#

This is also the choice of most people. After all, in the environment where P2P funding platforms in the A-share market are collapsing one after another, the more you invest, the further your wealth seems to drift away.

This plan is not without merit; not messing around when you don't understand is a good investment strategy.

Additionally, in a recession, cash is king, making this plan even more defensible.

I will not advise this group of people to rashly change their plans, but I still want to offer some suggestions:

• If your assets, including current and fixed "deposits," exceed 500,000 RMB, it is advisable to spread them across multiple banks.
  • Because the deposit insurance limit set by the PBOC for a single bank is 500,000 RMB, if one bank collapses, the central bank can guarantee you can get back 500,000 RMB.
• Remember that today, there are no "investment products" that are rigidly redeemable. If a bank collapses, the bank has no legal obligation to compensate you.
  • A simple way to distinguish between investment products and deposits is to check if the product contract contains the words "fixed deposit." If not, it is classified as an "investment product."
• It is only advisable to keep funds in 11 banks; it is best to keep little or no funds in other banks.
  • Six major state-owned banks: Agricultural Bank, Industrial and Commercial Bank, Bank of China, China Construction Bank, Bank of Communications, Postal Savings Bank
  • Five major joint-stock banks: China Merchants Bank, Industrial Bank, Shanghai Pudong Development Bank, China CITIC Bank, Minsheng Bank

🔒 Domestic banks purchasing foreign currency deposits/investments#

To avoid the depreciation of the RMB exchange rate, I have seen some friends exchanging RMB for USD in their respective banks to earn interest.

This is indeed a plan, but you need to know that domestic banks' foreign currency deposits:

• Have transfer restrictions/limits
• Are not covered by deposit protection
• Can be forcibly converted
  • Theoretically
  • There have been instances where someone on Weibo sought help because the USD transferred from overseas to their parents was forcibly converted to RMB.

🇭🇰 Depositing in Hong Kong banks/investments/brokers#

This year, the trendiest item is opening a card in Hong Kong, regardless of whether people have used it or not.

The benefits of a Hong Kong card are indeed numerous, and I recommend you open a few if conditions allow. Its advantages have been discussed enough elsewhere, so I won't elaborate here. I will discuss how I will use it in detail later.

Here are some points beyond the benefits:

• After the National Security Law was passed, Hong Kong has become increasingly secure, and everyoneBIG BROTHER can easily protect your funds across borders.
• Recently, some friends trading stocks with Hong Kong brokers have received tax payment notifications. It's too easy for Hong Kong and Chinese brokers to compile a list.
  • Although there are currently no legal provisions for taxing overseas securities investments in China, the law clearly states that residents cannot invest in unapproved overseas projects. If taxation occurs, it would imply a de facto acknowledgment of the legality of residents' overseas assets.

In recent years, Hong Kong has also been upgraded to an international financial center, so it is not recommended to keep large amounts of funds there for the long term.

🌐 Transferring to overseas banks#

If someone is currently in China, the only banks they can legally open accounts with are just a few. The following chapters will provide detailed introductions.

Let's talk about the common issues with these banks:

• Deposit protection is only up to about $120,000
• Risk control is inexplicable; accounts can be closed directly, and checks mailed, a typical example being OCBC
• Transferring to other countries/regions incurs hefty wire transfer fees
• Exchange rates are increasingly unfavorable

In summary, I would only consider these banks as a link in the transfer process, not as a destination for holding large deposits.

Note ⚠️:
Opening accounts has become a popular trend in recent years, with various tutorials for residents on how to open accounts and transfer funds emerging everywhere, showcasing various skills.
If you forcefully open an account through forged documents, having your account closed would be mild; facing a CIFAS could be a significant loss, and I strongly advise against such actions.

Holding other hedging assets#

💰 Physical Gold#

There has always been a saying, "In prosperous times, antiques; in chaotic times, gold."

Moreover, whether it is the recent siege of Sarajevo, the Russia-Ukraine war, or the economic collapses in Zimbabwe, Argentina, and Sri Lanka, practical experience shows that after local economies collapse, the only two hard currencies for trading among civilians are:

USD and gold.

However, I still strongly advise ordinary people (living in China) against hoarding or holding gold as a hedge.

War?#

Although I mentioned at the beginning that this article does not aim to avoid war risks, I want to say a little to friends worried about war risks: when your place of residence faces war risks, the first thing you should do is: escape.

Instead of thinking about how to enjoy a post-apocalyptic farming life with the supplies, gold, and USD you hoarded.

When there is a risk of war, you must carry important items and escape from the danger zone immediately. You may have concerns (work, house, etc.), but if you stay, the cost you will pay in the future will definitely exceed what you cannot give up now. (You can recall if, during the great plague, news of a lockdown came out, and you chose to stay.)

Gold is obviously not portable, and:

• If you escape to another city:
  • Assuming you take public transport, carrying gold bars, even if you are not robbed on the way, you won't pass security checks.
  • Assuming you drive and smoothly pass various checkpoints without being robbed, once you reach a safe area, gold will be of little use.
• If you want to escape to another country, all countries have strict gold detection and control at their borders, which may delay your time and bring other troubles.
  • Moreover, once you escape to a safe country, gold will also be of little use.

Hedging against ordinary depreciation of RMB/local currency?#

The disadvantages of holding physical gold as a hedging asset include but are not limited to:

• High buy-sell spread
• Numerous pitfalls and complexities in offline stores, whether for purchase or resale
• Possible losses during storage
• Very poor liquidity
• Poor risk-reward ratio
• Easily confiscated

Economic Collapse?#

Assuming there is no war, and you do not expect it to yield good returns, what if you wake up one day to find the economy has collapsed? Wouldn't that be useful?

When the economy is good, all players involved in gold resale will find ways to exploit you; will they suddenly become conscientious when the economy collapses?

If you just want to exchange for some food and necessities, and you get scammed, fine, that might be acceptable.

🪙 Cryptocurrency#

In the context of this article, readers may primarily expect cryptocurrencies to be used for the following purposes:

To transfer funds#

The biggest drawback of using cryptocurrency for fund transfers is perhaps counterintuitive: small fund capacity, low limits.

If you neither know trustworthy friends who already hold large amounts of cryptocurrency nor have other channels, the options left for ordinary people are almost limited to: exchange OTC.

Using this method to buy a few tens of thousands of RMB worth of USDT might trigger a fraud hotline visit. In severe cases, your bank account or cryptocurrency exchange account could be frozen.

This does not mean the limit is necessarily a few tens of thousands of RMB; this is in a gray area with too many uncontrollable factors, and the limits are opaque. A few thousand might be fine, while hundreds of thousands might not be monitored.

Other drawbacks:

• During the purchase process, you need to submit various private information to the OTC merchant.
• OTC merchants might use various means to deceive.
• There have been recent cases where OTC transactions were involved in "illegal foreign exchange trading."
• If you plan to emigrate, the source of funds is very important, involving tax proof, source of funds proof, and various materials. Cryptocurrencies can obscure the source, requiring more complex documentation.

To hedge against ordinary depreciation of RMB/local currency#

Generally speaking, the perceived benefits of holding cryptocurrency as a hedging asset include:

• Anonymity
  • In fact, your information in exchanges is directly linked to the authorities; IP + on-chain address + personal information are all strongly monitored.
  • Methods that do not go through exchanges have high thresholds and significant losses.
• Portability, requiring only physical or virtual mnemonic phrases/private keys.
• Easy to store, requiring only physical or virtual mnemonic phrases/private keys.
  • Most people still prefer to store in exchanges, where accounts can be frozen at will, and bankruptcy of exchanges is common.
  • Self-storage is the safest method, but the threshold is relatively high, and improper storage or theft of private keys is also common.
• No permission required
  • Except for BTC, other chains have precedents for marking and blocking addresses.
• Value preservation/appreciation
  • If you are a novice and believe BTC will appreciate, you can buy BTC-related ETFs in the U.S. stock market, where professional institutions help with custody, and brokers are generally safer and more reliable than cryptocurrency exchanges.
  • If you simply hold USD stablecoins (USDT/USDC), the costs of entering and exiting are high; it is better to hold USD directly in a safe platform that also earns interest.

If you understand the various risks and have a certain level of related knowledge, holding some cryptocurrency seems reasonable to me, as this is the first time in human history that technology has made private property sacred and inviolable.

Real Estate#

Real estate is the most typical risk asset, but why mention it here? Mainly to recommend an article for friends who plan to or already own real estate.

How to Handle Downside Risks When Buying Property in Japan in 1993?

Assuming you:

• Retain your current memory
• Understand the past and future
• Possess extensive financial knowledge and skills
• Travel back to 1993 (the third year after the Japanese economic bubble burst; this year is the nth year of falling property prices in China?)
• But must purchase real estate in Japan that year

What can you do to hedge against the risk of asset depreciation?

The answer is you cannot; you can only choose one relatively less bad option from several poor choices.

My Plan#

I believe everyone has heard of the recently popular "ABC Investment Strategy," which stands for "Anything But China."

However, this article does not discuss investment but rather risk avoidance. I believe the ABC strategy also applies to asset hedging plans.

But after discussing so many plans, if Hong Kong cards and banks are not viable, and overseas banks are not recommended, what should we do?

My answer is overseas brokers—Interactive Brokers (IBKR).

Plan Overview#

Plan:
Transfer domestic funds through overseas banks, moving the bulk of funds to IBKR, primarily holding USD.

Keep only emergency funds (6-12 months of living expenses) in domestic banks, using domestic income (incremental liquid funds) for regular consumption, or using the cards provided by overseas banks.

Reasons#

Safety and Advantages#

This article mainly discusses risk avoidance, meaning safety is the top priority, so let's first look at deposit protection:

Interactive Brokers LLC is authorized by the U.S. Securities and Exchange Commission and is a member of the Securities Investor Protection Corporation (SIPC).
Your securities held at IBLLC (or cash balances acting as margin for short stock or options positions) are protected by SIPC up to $500,000 (cash limit $250,000), and according to the excess SIPC coverage policy agreed upon with Lloyd's of London, securities accounts also enjoy additional protection of up to $30 million (cash limit $900,000), with a total limit of $150 million.

It can be said that its safety exceeds that of most ordinary banks. Once the safety issue is confirmed, let's look at other main benefits:

• Remote account opening available for mainland identities
• Interest, over $10,000 in cash earns 5% interest
• The first withdrawal each month is free
• Withdrawals and deposits support most major countries' local free payment networksLocal Payment Networks, such as:
  • SEPA in the Eurozone
  • FPS for GBP
  • FPS for HKD (Faster Payment System)
  • ACH for USD
• SpreadsSpread are minimal, and the best foreign exchange rates are available.

You might say: "I don't trade stocks or forex; I just want to keep my money in a safe place and earn some safe interest. What does this have to do with me?"

If you are someone planning to emigrate#

This means:

• In your preparation phase:
  • You can have a safe place for funds overseas in advance.
  • You can use your annual $50,000 foreign exchange quota in advance; this quota cannot accumulate and resets each year, so if unused, it will be wasted.
  • Assuming the preparation phase lasts two years, you can legally and conveniently move out $100,000 without moving yourself; the money is already abroad.
• If you plan to study abroad and need to remit tuition fees to the school in the future, you can avoid wire transfer fees and exchange for local currency at the best rate.
• After arriving in the destination country, please give up using your UnionPay card for ATM withdrawals; IBKR can also avoid wire transfer fees and exchange for local currency at the best rate, using local quick and free banking channels to withdraw to your local bank account, with no limit restrictions.
• IBKR's monthly statements can serve as complete proof of funds (in English).
• Before you become a tax resident of the destination country (180 days to several years), they will not impose capital gains tax on your IBKR account.
• Many countries offer a tax exemption period for new immigrants' overseas income (after becoming tax residents), as long as the profits are not remitted back to the country, they are not taxed.

If you have no plans to emigrate#

This plan can help you avoid all the risks mentioned earlier, and it can also:

• Provide strong deposit insurance and higher interest than domestic banks.
• If you do not want to hold USD, you can exchange for offshore RMB at a good rate.

💱 Currency Exchange and Capital Outflow#

Domestic RMB cannot be directly wired abroad, so you must first purchase foreign currency in domestic banks and then exchange it for other currencies before wiring out.

What currency should you exchange?#

Regardless of what currency you ultimately want to hold, the first step in currency exchange is to recommend the currency supported by your intermediary bank's location or the currency supported by the "local payment networks" of the intermediary bank.

For example, if you need to transfer to IBKR through a UK bank, you should choose "GBP" when purchasing foreign currency in China, using SWIFT to wire to the UK bank, and then the UK bank will transfer to IBKR using the "FPS" channel.

If you are transferring through a Hong Kong bank, you should purchase "HKD" in China for the transfer.

The same applies to banks in other countries.

The benefits of doing this:

• Only requires one "wire transfer," avoiding the second wire transfer fee from the intermediary bank to IBKR.
• Using the target bank's local currency minimizes the need to go through "intermediary banks."
  • As is well known, wire transfers may go through multiple intermediary banks, and each intermediary bank charges a fee.

How much can be transferred out in a year?#

The $50,000 foreign exchange quota we usually mention is a "convenience quota," meaning it does not necessarily mean that annual currency exchange cannot exceed this limit. However, exceeding this limit requires providing some proof to apply specially.

Just a reminder, the limit mentioned here is actually just the "currency exchange limit"; there is no limit of $50,000 for "outgoing transfers."

In other words, you can use up your currency exchange quota for several consecutive years and then wire out the entire amount at once, but this operation is not recommended.

Let's assume that the currency exchange quota ≈ outgoing transfer quota.

Without special applications, it is relatively easy to exchange out 650,000 RMB each year:

• Direct currency exchange quota from the bank: $50,000 USD ≈ 350,000 CNY
• Panda Speed Remittance special quota: 300,000 CNY (the principle is to match trades)

Other matching schemes will not be discussed here.

Remittance Plan#

I previously mentioned Panda Speed Remittance, but it has a single transaction limit of $3,000, with a fee of 80 RMB per transaction.

If you exchange the full 300,000 RMB quota, the fee would be: (300,000/21,000) * 80 ≈ 1,200 CNY, which is more than double the wire transfer fee, and it can be quite painful.

So if your funds are not particularly large and not particularly urgent, there is no need to rush to use this method to fill the quota; you can slowly move it using the bank quota.

Currently, there are several fee-free wire transfer options for transferring funds abroad:

• HSBC CN for transfers to HSBC globally at the Premier level and above
• Domestic Bank of China remittances to Bank of China Hong Kong
• Industrial Bank has recently been running fee-free wire transfer promotions, which seem to end at the end of 2024.
  • Note that intermediary bank fees may be charged.

Here, I most recommend the third option for the following reasons:

• Industrial Bank's promotion does not limit the target bank, allowing transfers to any convenient/favored bank.
• Industrial Bank's "Global Life Debit Card" allows currency exchange at a relatively favorable rate.
• HSBC's exchange rates are notoriously poor, and not everyone can meet the standards for HSBC CN's Premier level.
• Domestic branches of Bank of China may restrict your transfers, and branches in Hong Kong may restrict your account opening.

Tips#

Here are some tips that may help you save a lot of money:

• Currency exchange can be done multiple times, purchasing when the exchange rate is favorable, accumulating to a certain amount, and then transferring out, for the following reasons:
  • Save on wire transfer fees
  • Average exchange rates
  • Save on the number of outgoing transfers
• Each person should not exceed 4 outgoing transfers per year; although this is not explicitly stated, exceeding this limit can lead to significant trouble, potentially making it impossible to transfer funds again.
• When exchanging currency, it is best to state the reason as personal travel to avoid causing trouble for the bank; banks also prefer not to trouble you.
• All banks are wary of the following behaviors:
  • Frequent large amounts, quick in-and-out
    • For large amounts going through intermediary banks, my suggestion is to keep them for at least a week before transferring out.
  • Frequent non-matching name transfers in and out.
• IBKR has also launched a payment function, equivalent to issuing you a debit card for consumption, but it is best not to use it frequently, as it can easily lead to account closure.
• IBKR only exchanges foreign currency; if you do not trade, it is easy to have your account closed.

💳 Domestic Living Expenses#

For domestic living, it is advisable to prioritize spending from incremental or existing funds in China.

If there is no incremental income in China, and you do not want to use emergency funds, and most of your funds have been transferred out, what should you do for daily living expenses?

Card Type Knowledge#

First, let's familiarize ourselves with the basic types of cards:

Specific Plans#

The article will introduce some overseas banks later; although most of them have cards, they are not recommended for primary use due to exchange rates/fees, but can be kept as backups.

For domestic consumption, my primary card is a Hong Kong card, and I will introduce some situations:

Spending in RMB#

If spending in RMB, the following methods are recommended in descending order:

• Currently, the strongest is HSBC's Pulse credit card, unmatched.
  • RMB/HKD dual currency means you can avoid currency conversion fees and unfavorable exchange rates.
  • With various promotions, cashback can reach over 10%.
  • The downside is that it cannot be linked to Alipay and WeChat, but works fine with Apple Pay/Meituan/Taobao/Didi.
  • HSBC has lowered the threshold; an account balance of 10,000 HKD is generally sufficient for approval.
• HSBC Red credit card
  • HKD single currency card, meaning spending in RMB incurs nearly 2% currency conversion fees + exchange losses.
  • The benefit is that it can be linked to Alipay and WeChat, achieving around 4% cashback, which basically offsets the currency conversion fees + exchange losses.
• Various debit cards supporting RMB
  • Exchange RMB in the account beforehand.
• Huamei UnionPay card
• Cash withdrawal using cash cards:
  • Cash consumption
  • Cash deposited in domestic banks for consumption
• Foreign currency remittance into China, then exchanging for RMB
  • Absolutely not recommended unless absolutely necessary.
  • Not only are there restrictions on currency exchange in mainland China, but there are also limits on foreign currency inflows, which is also $50,000.
  • A little-known fact: offshore RMB cannot be directly remitted into mainland China.
    • Brokers cannot directly remit to domestic banks, and offshore RMB cannot be directly remitted to domestic banks. Remitting and then exchanging for RMB incurs multiple layers of fees.
  • Domestic banks receiving foreign currency may require you to provide various proofs, and you may need to submit them offline; otherwise, they may freeze or return the funds.

Online Subscription Service Payments Requiring Other Currencies#

At this point, some services may not work well with Hong Kong cards, such as ChatGPT memberships.

The following methods are recommended in descending order, noting that you need to exchange the required currency in the account beforehand to avoid conversion fees:

• Wise
• Overseas bank debit cards
• Hong Kong debit cards

For the debit card consumption mentioned above, it is best to exchange the target currency in the account beforehand. This is where IBKR comes into play:

Since the exchange rates offered by banks are generally not favorable, IBKR offers good rates, and the first withdrawal each month is free. This means you can exchange a certain amount of foreign currency at a good rate each month and wire it to your bank account for consumption without any fees.

If it is small foreign currency consumption, it is still better to use Wise first; although IBKR offers the best exchange rates, each exchange incurs a commission, and the free withdrawal limit can be reserved for emergencies.

🏦 Overview of Overseas Banks#

As we all know, domestic banks cannot directly wire funds to brokers. Even remitting to some overseas banks is restricted (for example, to Huamei/Huamei Velo).

Therefore, overseas banks are needed for transfers, and this is where overseas bank accounts come into play.

Initially, I thought that having a few bank accounts was sufficient, but as personal needs changed and time passed, I watched various good banks/services stop accepting new users, truly embodying "early application, early enjoyment; late application, anxious waiting."

If transferring funds (capital outflow) is treated as a game, then various accounts are like different functional tools, many of which are limited-time items. When playing a game, would you complain about having too many tools?

Many card enthusiasts treat cloud account openings and obtaining various special card designs as a real-world Gwent card collection game.

Several Banks in Hong Kong#

There are many detailed guides for opening cards in Hong Kong; you can easily search for them.

My suggestion:

• "HSBC HK" is a must, and others depend on your situation. If conditions allow, you can also have a state-owned commercial bank (China Merchants Yonglong), a state-owned bank (Bank of China Hong Kong, ICBC Asia), a foreign bank, and a virtual bank.

Methods to open an HSBC Hong Kong account without leaving the country:

• First, open an "HSBC CN" Premier account by either going through the "Employee Program" or depositing 500,000 RMB, then request your RM to open a Hong Kong account for you.
• Open an "HSBC Expat" (offshore Jersey account) online, deposit 50,000 GBP, and then request your RM to open a Hong Kong account for you.

Tips:

• The 500,000 RMB fund requirement can be negotiated before opening; some friends have managed to keep it in the account for only a few months and then withdraw it while maintaining Premier status.
• This 500,000 RMB does not necessarily have to be a deposit; purchasing stocks and bonds also counts, which can improve fund utilization efficiency.
• "One Premier Account, Global Premier" means that deposits in HSBC HK can also maintain Premier status (the requirement in HK is the equivalent of 1 million HKD).
• Even if you cannot meet the Premier standard, opening "HSBC One" in Hong Kong will not have much impact.
• Cherish your account; I only recommend opening "HSBC HK." Do not mess around with accounts in other regions unless there is a special need; be careful of "one closure affecting all accounts globally."

Overview of Overseas Banks#

Here, I will only list:

• Banks that support mainland Chinese identities
• Remote/online account opening
• No intermediaries required

Special HSBC or other smaller, less reputable accounts will not be listed here.

📚 Recommended Reading#

• How to Apply for a Hong Kong Card - Maple
• A Brief Note on Opening an Account with OCBC Bank in Singapore
• Fwd: Complete Record of Opening HSBC Global Accounts
• A Few Suggestions for Protecting Deposit Safety
• Is a Deposit Under 500,000 Really 100% Safe?
• How to Continue Avoiding Pits in 2024?
• The Best Methods for Transferring Funds from Mainland to Hong Kong
• A Few Financial Advice for Young People