For a country which allegedly invented paper currency, China is still woefully behind in terms of personal banking services – although things are quickly changing for the better.
As the vast majority of foreigners working in China are paid through their overseas accounts, most simply do not bother opening accounts at Chinese banks. With the growing availability of ATM machines in leading cities, they simply withdraw whatever funds they need from their overseas bank accounts. Indeed ATMs can now be found in increasing numbers throughout the country.
Strapped for cash
As recently as two years ago, however, with-drawing cash was extremely inconvenient. Even in an advanced city such as Shanghai there were very few banks, either foreign or domestic, with ATM machines. Mr Will Beloe, a British consultant with PriceWaterhouseCoopers, recalls cycling from his home on Huahai Road down to Citibank on the Bund, a distance of a few kilometres.
"It seemed to be something I did every Saturday and occasionally I would get there to find it out of service," said Beloe. "On another occasion I stuck my card in the machine, heard the usual whirring sound and nothing popped out except my card and a receipt stating that I had withdrawn Y n 2,000 (US$241)." After complaining to the bank eventually recovered his money about one month later. The facts that Chinese banks do not issue cheque books for consumers, and foreign cheques are of no use whatsoever, make for some interesting experiences when purchasing large-ticket items or even just paying the rent.
"We decided earlier this year to buy a car," says an American banker married to a Shanghainese woman. "After exhausting all our options, by means of elimination we were forced to withdraw the entire purchase price of the car in cash using our ATM cards.
"As ATMs will only dispense a few hundred US dollars-worth of yuan each time, we were forced to make repeated trips to various ATM machines around Shanghai," he continues. "Keeping in mind that the highest currency denomination in China is Yn100, equal to about US$12, we ended up lugging large grocery bags stashed with money to the car dealership, where each note was painstakingly counted and recounted."
In some parts of the country there can be a dearth of coins, making it is easy while travelling to end up with a large amount of almost worthless paper currency. However this can be useful for tipping taxi drivers or giving to children when you return home.
Dual pricing has been abolished but store-keepers still think foreigners are there to be ripped off. If prices aren't marked, it's advisable to check. If you don't speak Chinese, ask them to write it down or show you on a calculator. Antiques sellers will always give a price that is anywhere from two to four times what they are prepared to accept.
Chinese banks are not really integrated into the global financial network and do not provide any real advantages to foreigners living in China. The banks, however, do not provide any obstacles to foreigners who wish to give them their business.
One of the factors holding up China's entry to the World Trade Organisation has been Beijing's objection to opening up its banking system to foreign competition. Chinese banks fear they would be eclipsed by foreign entrants and have lobbied hard for the government to give them more time to strengthen their operations.
While foreign banks are slowly being allowed greater access to the market, they are some way from being allowed to operate on a level playing field with Chinese financial institutions.
Credit card acceptance
Credit cards, which are usually employed as a means of getting cash from ATMs, are accepted by most large hotels, some up-market restaurants and foreign airline offices ?establishments frequented by most business travellers. Otherwise, acceptance is limited. Travel agencies sometimes charge a five percent service fee for airline tickets purchased with a credit card. A charge is less likely to be levied if you buy direct from an airline representative office.
The Chinese are great savers – around 40 percent of income is saved and the cur-rent amount of domestic savings is more than US$720bn, according to Visa International. However, they seem reluctant to embrace the notion of buying on credit, usually borrowing money instead from friends or family. The procedures for checking the credit status of individuals are also backward and hold back the issue of credit cards.
Chinese banks issue debit or deferred debit cards which can be used at some department stores and restaurants. Five years ago there were fewer than 10m of these payment cards in China. Today there are more than 100m in circulation, comprising 30m Visa cards, 20m other international payment cards and 50m local brand cards. Visa expects that 15-20 percent of all consumer purchases within the next five years will be settled by payment card.
Foreign currency, particularly the US dollar, is warmly welcomed at banks in cities throughout the country. There is no longer any problem with bringing foreign currency into China or taking it out, except when very large sums are involved. Travellers cheques are a safe and convenient means of bringing cash into China. Hotel exchange rates are usually competitive but the best deal is likely to be offered by commercial banks. The Bank of China, the country's largest commercial bank, is the easiest place to get money changed.
Outside these banks lurk money traders eager to give slightly better rates of exchange to foreigners. Although illegal, they are everywhere and often use the air-conditioned comfort of the banks to conduct their trade. Willing to exchange almost all foreign currency, it is not unknown for them to pull a fast one on a jet-lagged foreigner ?counterfeit notes in particular are becoming an increasing problem.
Counterfeit Yn50 and Yn 100 notes are becoming more common and can be of high quality. However they don't have the same texture as bona fide currency and feel slightly stiff to the touch. Moreover, counterfeit bills, when held up to the light, do not feature the usual watermark of a patriotic-looking Chinese worker.
Many foreign business people bring their operating expenses with them in foreign currency and exchange it on the black market, although obviously this has its dangers, both from the police and from counterfeiters.
Begging is on the increase. Bars and restaurants frequented by Westerners often have little children begging outside, their parents lurking in the shadows. In big cities it is common to see old people and the disabled begging.
Theft is also said to be common but mugging is very rare because of the draconian penalties meted out by the Chinese legal system. Travelling by train is a hazard and you should keep a careful watch over your goods.
Pickpockets are a problem in crowded places, such as markets. Make sure to keep your wallet or purse in a safe place.
School makes its move
The China Europe International Business School is moving officially to its new campus in the Pudong area of Shanghai on October 15. Already the most prestigious business school in China, CEIBS hopes the move will help to enhance its reputation and facilitate its ambition to become one of the top five schools in Asia, on a par with the top institutions in the US and Europe.
The new campus is located in Jinqiao, one of Pudong's most vibrant zones and home to many large foreign investors, including the massive General Motors plant. It will be built in three phases at a total cost of US$30m. The first phase, costing US$18m and covering an area of 18,000 sq metres, contains two residential blocks capable of accommodating 520 students. Around half of this capacity will be taken up with MBA students, while the remaining dorms will be used by students on other courses, such as the executive MBA programme.
The new facilities include canteens, auditoriums, break-up rooms and a state-of-the-art information centre. "The infrastructure will be as good as anything in the world," says Dr. Bert Bennett, executive president of CEIBS. The biggest improvement on the old campus will be its more accessible location and the close proximity of all the facilities to one another. "Everyone will be in one building," he continues.
CEIBS actually started out in Beijing in 1984 as the China Europe Management Institute, before moving to Shanghai and changing its name a decade later. Backed by the EU and the Shanghai municipal government, its central aim is to train internationally-oriented Chinese managers. The school remains the only Western management institution in China, offering a full-time MBA programme taught in English. It also runs diplomas and practical courses in areas such as accounting, productivity and brand management. Then there are programmes tailored to individual companies and in-depth country introduction seminars.
The school has a permanent faculty of eight, which it wants to increase to 20. To develop the international exposure of students, lecturers and professors are brought in from 20 partner schools from around the world, including IMD, Insead, Columbia and the London Business School. CEIBS is particularly keen to attract Chinese staff with international experience to the faculty.
There are now more than 50 Chinese universities offering MBAs, but their quality is impaired by the use of old-fashioned teaching methods and a lack of international exposure among the lecturers. In addition, there are part-time MBAs offered by the likes of Rutgers University of the US. It operates a 13-month part-time course in Beijing where students are taught by visiting lecturers from the US.
Despite these new options, demand for management education in China still far out-strips supply. Even the Asian financial crisis has done little to depress demand. Bennett observes that most foreign companies in China are having a serious rethink about their staffing policy. He says the Asian crisis has hastened the process of localisation, which is benefiting the school since locals have a greater need for management training than foreign staff.
There is also scope for more business from Chinese enterprises. The fast-growing privately owned sector offers great opportunities, while state enterprises have been instructed to become more accountable, with profit now a top priority.
Future participants in CEIBS courses are more likely to be given greater freedom to take the initiative, to question established practices and to take responsibility for their own actions. In the past, state enterprises have tended to select candidates for MBA courses on the basis of the company's hierarchy, rather than their own managerial talent.