It all depends on what kind of tax treaty US has signed with China. Some countries have tax treaty with China to avoid their citizens or ( business operation ) in China to pay dual taxes to two countries they either reside or have cityzenship of and in such circumstances a citizen of one country needs only to pay tax to either country (often the country of low tax) and avoids paying tax to another country. Check with American embassy in China or some international accounting firm operating in China to get some info on this.

Yes, China does have a reciprocal tax treaty with China and a Google search will answer your question far better than anyone here.

Last time I checked you could earn 60K US$ before having to pay any tax to the US federal tax machine.

2010

$91,500

Future Years

Indexed for Inflation

You elect the foreign earnings exclusion on Form 2555. Foreign earnings includes wages, salaries, commissions, professional fees, and bonuses, for personal services performed in a foreign country during the time your tax home is in a foreign country and you meet either a bona fide residence test or a physical presence test. The place where you perform the services is what defines your foreign earnings as foreign, not where or how you are paid.

In order for your foreign earnings to be excluded from your tax return, any income must meet the IRS foreign earnings exclusion tests. Usually, the foreign earnings exclusion from your tax return does not include investment income such as interest, dividends, capital gains, pensions, annuities, gambling winnings, alimony, or amounts attributable to certain employee trusts. If you are sole proprietorship or partnership and both capital investment and personal services are factors in producing your foreign earnings, your excludable foreign earnings from your tax return is the smaller of the value of your personal services or 30% of net profits. Employees of the U.S. Government cannot claim the foreign earnings exclusion on their tax return based on money the government pays them while working abroad. Additional rules are described in IRS Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.

Foreign Earnings Exclusion - Bona fide Residence Test
The bona fide residence test can be used by U.S. citizens and U.S. resident aliens who are citizens or nationals of a country with which the U.S. has an income tax treaty. You must be a bona fide resident of a foreign country or countries for an uninterrupted period that includes one full tax year. The characteristics usually qualifying you as a bona fide resident include establishing a home and settling in that country with some degree of permanence.

Foreign Earnings Exclusion - Physical Presence Test
The physical presence test can be used by any U.S. citizen or resident alien. You must be physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months. The 12-month period can begin with any day in the tax year.

Generally, your tax home is the general area of your main place of business or post of duty, regardless of where you maintain your family home. If you do not have a regular or main place of business because of the nature of your work, then your tax home may be the place where you regularly live. You are not considered to have a tax home in a foreign country for any period for which your household is in the U.S. However, if you are temporarily present in the U.S., it does not necessarily mean that your household is in the U.S. during that time.

You qualify for the foreign earnings exclusion only if your tax home is in a foreign country throughout your period of residence or your 330 days of physical presence.

Foreign Earnings Exclusion - Self Employment Tax
Your net self employment income is generally subject to self employment tax even if it is excluded for income tax purposes. However, if it was earned in a country that has a social security agreement with the U.S., called a totalization agreement, it may be exempt from U.S. social security tax, including the self employment tax. The countries that have entered into this agreement are listed in IRS Publication 54.

If you violate U.S. Government restrictions that prohibit travel to certain countries you will not be able to claim the foreign earnings exclusion on your tax return against amounts earned in those countries. See IRS Publication 54 for current travel restrictions.

if your paid in cash, this is irrelevant , nobody here is going to ask for your social security number and report anything to the irs.