Although it is now common practice in the PRC to use the payment function of the ubiquitous and all-powerful APP WeChat to settle bills, there is still cash for the old-fashioned shopper.
The Chinese Renminbi (RMB, “people’s currency”) is divided into 1 Yuan (also known as Kuai) = 10 Jiao = 100 Fen. Most Chinese cash is in circulation in the form of banknotes. There are 1, 2, 5, 10, 20, 50, and 100 yuan notes. Older 1 yuan coins, however, are rarely found. While Jiao still occur in everyday payment transactions, Fen almost only play a role as book money.
According to franciscogardening, payment transactions in China are unproblematic. If you want to withdraw cash in China, you can do so at one of the many ATMs of the major Chinese banks (Bank of China, China Construction Bank, the Industrial and Commercial Bank of China, etc.). For withdrawals with a Maestro / EC card, fees of up to 4 euros apply. When withdrawing with EC cards, it is therefore worth withdrawing larger amounts of cash. At the Bank of China, cash can also be withdrawn with a credit card.
Foreign currencies can be exchanged for Chinese RMB at the current exchange rate at the Bank of China. Travelers checks issued in a foreign currency are also accepted here (e.g. American Express, Citicorp).
If you want to pay by credit card, you can do so in the large hotels, restaurants and department stores of China’s metropolises. In smaller shops and restaurants as well as outside of the big cities, however, you have to pay with cash.
It is also possible to open an account with a Chinese bank without any problems. You should make sure that the bank has a comprehensive network of ATMs throughout China and that you can withdraw free of charge nationwide. However, this is the case with the large banks such as the Bank of China, China Construction Bank, the Agricultural Bank of China etc.
Anyone who orders online can pay by bank transfer, PayPal or cash on delivery.
Currency and banking system
China’s currency is the Renminbi (Yuan / RMB to 10 Jiao [Chiao] or 100 Fen). The yuan exchange rate is not free, but may fluctuate 2% up or down in relation to the daily reference rate to the dollar set by the central bank.
Although the yuan was recognized by the IMF as a reserve currency at the end of 2015, the yuan is still only tradable in special payment centers (e.g. Frankfurt) and is not freely convertible. In the past, the USA in particular accused China of deliberately undervaluing the yuan in order to boost its own exports.
An example of such an approach were the rate cuts by the Chinese central bank in summer 2015 by 1.9% and 1.6% respectively. In general, however, the yuan has appreciated in value over the years. Between 2005 and 2013, for example, it increased in value by almost 32%. But it is also a fact that the PR China has the largest currency reserves in the world, which currently amount to around US $ 3.0 trillion.
At the top of the Chinese financial system is the People’s Bank (Renmin Yinhang), which performs the functions of a central bank such as money supply control and exchange rate policy. Otherwise, the Chinese banking system is characterized by four large state-controlled banks. These are the Bank of China (BOC), Industrial and Commercial Bank of China (ICBC), the Agricultural Bank of China (ABC) and the China Construction Bank (CCB). Other smaller banks are for example the China Minsheng Bank or the China CITIC Bank.
China’s banks are closely linked to the state and, if necessary, must serve to support even unprofitable projects with large loans. Many industries and local governments were thus driven into over-indebtedness.
Since private individuals find it difficult to take out loans due to the large banks’ focus on state actors, shadow banks in China play a role that should not be underestimated.
Chinese government spending for 2019 was 23,887.4 billion yuan, according to official figures. The largest expenditure items in 2018 included education (15%), social security (11.5%) and agriculture (10%). The military budget is officially 5.2% of the total budget, but experts estimate it to be much higher.
The public debt of the PRC was 44,762.2 billion yuan (5,721.1 billion euros) in 2018, 50.4% of GDP. Although this is a comparatively low debt ratio, the debt of local governments in particular has increased dramatically in recent years. This is exacerbated by the fact that China’s local governments have only limited revenue streams, but at the same time have to pay for the high costs of social benefits and schooling.
Some international experts even assume that the PRC’s total debt is significantly higher. A 2015 McKinsey study, including government, corporate, household and financial institutions’ debts, estimated China’s total debt burden at US $ 28.2 trillion, which corresponds to 283% of GDP.