China’s Yuan is still struggling - time to get your money out?

User Written by Joseph Regan on November 15, 2016.

China’s Yuan is still struggling - time to get your money out?

Last November I got a lot of questions from expats in China who had seen their incomes and savings tumble in tandem with the falling yuan. I wrote a blog post about how to protect yourself against further predicted devaluation, and one year later these predictions have largely come true with the yuan currently trading at 6.824 to the dollar (that’s a 7% drop from last year’s 6.34 and a 9% fall since August 2015!). Here’s a graph of the pairing over the last 12 months:

USD-CNY exchange rate 2016

If you weren’t convinced to exchange RMB into another currency a year ago, perhaps you will be now. With the OECD predicting economic growth in China to edge down further in 2017, it doesn’t look like there is going to be improvement any time soon. That being said my advice hasn’t changed much. I still believe it is a good idea to avoid holding large amounts of yuan and instead hold cash in a reserve currency.

With the pound currently struggling in the face of Brexit you might be opting for dollars or euros to protect your RMB against possible future devaluations. The dollar has been strengthening over the last few months as the US economy performs better and unemployment is falling, and it has continued to fare well even after a Trump victory. However, if you are British with the majority of your savings in Sterling, right now is also a fantastic time to convert your RMB to GBP since the currency is trading at a 10-year high (see the chart below).

GBP-CNY 10 year exchange rate

Three useful tools are at your disposal to easily get money out of China. The first is an offshore bank account. They are easy to open, have English-speaking staff, and make it possible for you to keep your funds in a tax-free and secure jurisdiction with the option of holding accounts in several currencies. Many of my expat clients (and even myself!) have these accounts and find them very practical for managing their finances.

Transferring money from a Chinese bank account to an offshore one can be a headache due to the daily limits imposed by Beijing. You are also unlikely to peg the best rates when transferring via your Chinese bank. Better rates and headache-free transfers can be assured by using a currency exchange broker.

And last but not least, investments. Instead of converting your yuan to balance against devaluation, why not invest in another currency to make it grow? There are great, tax-efficient investments out there available to expats just like you, which will not only help you exchange your cash into a stronger reserve currency, but also capture high growth rates.

If you had heeded my advice from last year, you would be just a bit richer today. Start 2017 off right with a savvy financial move and don’t make the same mistake twice; the RMB will certainly continue to devalue throughout next year.

Feel free to get in touch for more info. My email is jregan@infinitysolutions.com, and my number is +86 152 2182 4499.

Joseph Regan

Joseph Regan

Posted on November 15, 2016 in Expats & Currency.