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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 account restrictions on transfers/withdrawals
• Domestic bank failures
• Tightening of capital outflow/foreign exchange policies
  • Some important time points in China's personal foreign exchange policy:
    • 1995: Stopped using foreign exchange vouchers
    • 2001: China joined the WTO, committing to gradually relax foreign exchange controls
    • 2003: Individuals began to be allowed to hold foreign exchange, but purchases still had strict restrictions, with no clear quotas and various proof required 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 of individual foreign exchange purchases, requiring purpose declarations, etc., and prohibited direct remittances to brokers
  • It can be seen that individuals have had a certain degree of freedom to exchange foreign exchange from 2007 to the present (2024), but it has only been 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 blockade and restrictions on Russian citizens' accounts

Suitable audience:

• Individuals in the country with certain savings but want to avoid the aforementioned risks
• Those planning to immigrate within a certain period and want to move funds 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 be 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 money seems to go.

This plan is understandable; not messing around without understanding is a good investment strategy.

Additionally, in a recession era, 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 that you can get back 500,000 RMB.
• Remember that today, there are no "investment products" that are rigidly redeemable; if a bank collapses, it 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 less 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, CITIC Bank, Minsheng Bank

🔒 Domestic bank foreign currency deposits/investments#

To avoid the depreciation of the RMB exchange rate, I have seen some friends exchange 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 people on Weibo sought help saying that USD transferred from overseas to their parents was forcibly converted to RMB.

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

This year, the trendiest and most fashionable item is opening a card in Hong Kong, whether people use 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 later.

Here are some points beyond the benefits:

• After the National Security Law was passed, Hong Kong has become increasingly safe, 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 is too easy for Hong Kong-funded brokers to pull a list.
  • Although there are currently no legal provisions for taxing overseas securities investments in China, the law clearly states that residents are not allowed to 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 you are currently in the country, the only banks you 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 for currency conversion are increasingly unfavorable

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

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

Holding other hedging assets#

💰 Physical Gold#

There is 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 economic collapse, the only two hard currencies for material transactions 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 residence is at risk of war, the first thing you should do is: escape.

Instead of thinking about living off your hoarded supplies, gold, and USD in a post-apocalyptic farming lifestyle.

In the event of war risks, you must immediately carry important items and escape the danger zone. You may have concerns (work, house, etc.), but if you stay, the future cost will definitely exceed what you cannot give up now. (You can recall if, during the great plague, news of lockdown was announced, and you chose to stay.)

Gold is clearly not portable, and:

• If you escape to another city:
  • Assuming you take public transport with 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 entry and exit points, which may delay your time and cause other troubles.
  • Moreover, once you escape to a safe country, gold will also be of little use.

Hedging against ordinary depreciation of RMB/fiat currency?#

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

• Large buy-sell spreads
• Offline stores, whether for purchase or recycling, have countless pitfalls and tricks
• 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 good returns, just waking up one day to find the ordinary economy has collapsed, wouldn't that be useful?

When the economy is good, all players in gold recycling can 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’s acceptable.

🪙 Cryptocurrency#

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

To transfer funds#

The biggest disadvantage of using cryptocurrency to transfer funds may be 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 may trigger fraud hotlines. In severe cases, bank accounts and cryptocurrency exchange accounts may be frozen.

It’s not that the limit is necessarily tens of thousands of RMB; this is in a gray area, with too many uncontrollable factors, and the limits are opaque. A few thousand RMB might get through, while hundreds of thousands might not.

Other disadvantages:

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

To hedge against ordinary depreciation of RMB/fiat currency#

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

• Anonymity
  • In fact, your information in exchanges is directly accessible to the authorities; IP + on-chain address + personal information are all strongly bound and 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 exchange bankruptcies are common.
  • Self-storage is the safest method, but it has a higher threshold, and improper storage of private keys or theft 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 US stock market, where professional institutions help with custody, and most brokers are safer and more reliable than cryptocurrency exchanges.
  • If you simply hold USD stablecoins (USDT/USDC), the costs of entering and exiting are very high; it is better to hold USD directly in a safe platform that also earns interest.

If you understand the various risks and have some relevant knowledge, holding some cryptocurrencies is not a bad idea, 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. Why mention it here? Mainly to recommend an article for friends who plan to or already hold real estate.

How to deal with the risk of price decline when buying a house in Japan in 1993?

Assuming you:

• Retain your current memory
• Understand the past and future
• Possess a wealth of financial knowledge and tools
• Travel back to 1993 (the third year after the Japanese economic bubble burst; this year is the nth year of declining house prices in China?)
• But must buy real estate in Japan that year

How can you 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; it only discusses hedging. The ABC strategy, I believe, is also applicable 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 Summary#

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

Keep only emergency funds (6-12 months of living expenses) in domestic banks, and primarily use domestic income (incremental liquid funds) for daily expenses, or use the card associated with the overseas bank.

Reasons#

Safety and Advantages#

This article mainly discusses hedging, 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 (with a cash limit of $250,000), and under the excess SIPC coverage policy agreed upon with Lloyd's of London, securities accounts also enjoy additional protection of up to $30 million (with a cash limit of $900,000), totaling a 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:

• Can be opened remotely with a mainland identity
• Interest, over $10,000 in cash earns 5% interest
• The first withdrawal each month is free
• Withdrawals and deposits support local free "Local Payment Networks" in most major countries worldwide, such as:
  • SEPA in the Eurozone
  • FPS for GBP
  • FPS (Faster Payment Service) for HKD
  • ACH for USD
• SpreadsSpread are minimal, and it offers the best foreign exchange rates.

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 immigrate#

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 does not accumulate and resets every year, and if not used, it will be wasted.
  • Assuming the preparation phase is two years, this allows you to legally and conveniently move out $100,000 without moving yourself.
• If you plan to study abroad and need to remit tuition to the school, you can avoid wire transfer fees and exchange at the best rate to remit local currency to the school.
• After arriving in the destination country, please abandon your UnionPay card ATM withdrawals; IBKR can also avoid wire transfer fees and exchange at the best rate to local currency, using local fast and free banking channels to withdraw to your local bank account, with no limit on the amount.
• IBKR's monthly statement can serve as a complete proof of funds source (in English).
• Before you become a tax resident of the destination country (which can range from 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 regarding overseas income (after becoming a tax resident), as long as the profits are not remitted back to the home country, they are not taxed.

If you have no immigration plans#

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

• Provide strong deposit insurance and offer 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 remitted overseas, so you must first exchange RMB at a domestic bank and then convert it to another currency for remittance.

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 "Local Payment Networks" supported by the intermediary bank.

For example, if you are transferring to IBKR via a UK bank, you should choose "GBP" when exchanging RMB domestically, using SWIFT "wire transfer" to the UK bank, which then uses the "FPS" channel to transfer to IBKR.

If you are transferring via a Hong Kong bank, then you should purchase "HKD" for remittance in China.

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."
  • It is well-known that wire transfers may go through multiple intermediary banks, and each intermediary bank will charge a fee.

How much can be transferred out in a year?#

The $50,000 foreign exchange quota we usually refer to is a "convenience quota," meaning it does not imply that you cannot exceed this quota for currency exchange each year. However, exceeding this quota requires providing some proof for special applications.

Just a reminder, the quota limit mentioned here is actually only for "currency exchange"; there is no limit of $50,000 for "remittance."

In other words, you can use up your currency exchange quota for several consecutive years and then remit it all at once, but this operation is not recommended.

For our purposes, let's assume that the currency exchange quota ≈ remittance 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 through matching)

Other matching schemes will not be discussed here.

Remittance Plan#

Earlier, I mentioned Panda Speed Remittance, but it has a single limit of $3,000 USD, 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 twice as expensive as wire transfer fees, and 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's quota.

Currently, there are several fee-free wire transfer options for remitting funds overseas:

• HSBC CN Premier and above remittances to HSBC globally
• Remittances from Bank of China in China to Bank of China Hong Kong
• Industrial Bank has recently had activities with no wire transfer fees, which seems to end by the end of 2024.
  • Note that intermediary bank fees may be charged.

I most recommend the third option for the following reasons:

• Industrial Bank's activity does not limit the target bank, allowing remittance to any convenient/favorite bank.
• Industrial Bank's "Global Life Debit Card" can exchange currency at a favorable rate.
• HSBC's exchange rates are notoriously poor, and not everyone can meet the standards for HSBC CN Premier.
• Bank of China branches in China may restrict your remittance, while 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 remitting together for the following reasons:
  • Save on wire transfer fees
  • Average exchange rate
  • Save on the number of remittance attempts
• Each person should not exceed 4 remittances per year; although there is no explicit regulation, exceeding this may lead to significant trouble, potentially making it impossible to remit again.
• When exchanging currency, it is best to state the reason as personal travel to avoid causing trouble for the bank; banks are also reluctant to create trouble for 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 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 not trading, it is easy to have your account closed.

💳 Domestic Living Expenses#

For domestic living, it is advisable to prioritize spending domestic incremental/stock funds.

If there is no incremental income domestically, 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 Plan#

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

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

Consuming in RMB#

If consuming 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, it can achieve over 10% cashback.
  • 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 over 10,000 HKD can generally get approved.
• HSBC Red credit card
  • HKD single currency card, meaning nearly 2% currency conversion fee + exchange loss for RMB consumption.
  • The benefit is that it can be linked to Alipay and WeChat and can achieve around 4% cashback, which basically offsets the currency conversion fee + exchange loss.
• Various debit cards supporting RMB
  • Exchange RMB in the account first.
• Huamei UnionPay card
• Cash withdrawal card:
  • Cash consumption
  • Cash deposited in domestic banks for consumption
• Foreign exchange remitted to the domestic account, then exchanged for RMB
  • Absolutely not recommended unless absolutely necessary.
  • Not only is there a limit on currency exchange in mainland China, but there are also limits on foreign exchange remittance, which is also $50,000.
  • A little-known fact: offshore RMB cannot be directly remitted to the domestic account.
    • Brokers cannot directly remit to domestic banks, and offshore RMB cannot be directly remitted to domestic banks. Remitting and then exchanging for RMB will incur multiple layers of fees.
  • Domestic banks may require you to provide various proofs upon receiving foreign exchange, which may require offline submission; otherwise, it may be frozen/returned.

Online Subscription Service Payments Requiring Other Currencies#

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

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

• Wise
• Overseas bank debit card
• Hong Kong debit card

For the debit card consumption mentioned above, it is best to exchange the target currency in the account first; this is where IBKR comes in handy:

Since the exchange rates offered by banks for foreign currency are not very good, IBKR offers excellent 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 remit it to your bank account for consumption without 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 is well known, domestic banks cannot directly wire transfer 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, my thought was that having a bank account is more about quality than quantity; having enough is sufficient.

However, as personal needs change and time passes, I have watched various good banks/services stop accepting new users, truly experiencing "apply early to enjoy, apply late to worry."

If we treat fund transfer (capital outflow) as a game, then various accounts are like different functional props, many of which are limited-time items. When playing a game, would you complain about having too many props?

Many card players 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 excellent and detailed guides for opening cards in Hong Kong; you can search for them easily.

My suggestion:

• "HSBC HK" is a must; for others, it depends 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 as backups.

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.
• Open "HSBC Expat" (offshore Jersey account) online, deposit 50,000 GBP, then request your RM to open a Hong Kong account.

Tips:

• The occupation of 500,000 RMB can be negotiated before opening; some friends have managed to negotiate that they only need to keep it in the account for a few months, after which they can 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, Global Premier," deposits in HSBC HK can also maintain Premier status (the requirement in HK is an equivalent of 1 million HKD).
• Even if you do not meet the Premier standard, opening "HSBC One" in Hong Kong does not significantly affect you.
• Cherish your account; I only recommend opening "HSBC HK." Do not mess around with accounts in other regions unless there is a special need, as you risk "one location closure, global closure."

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 obscure accounts will not be listed here.

📚 Recommended Reading#

• Hong Kong Card Application - Maple
• OCBC Bank Opening Notes
• fwd: HSBC Global Account Opening Record
• A few suggestions for protecting deposit safety
• Is a deposit under 500,000 really 100% safe?
• How to continue avoiding pitfalls in 2024?
• The best way to remit funds from the mainland to Hong Kong
• A few financial advice for young people