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Q: Grey money in China. It's silent and omnipresent.
I think that many of us who live here in China are quite familiar with the grey money concept. In the end, where does it come from? There has to be a beginning to this grey money somewhere. Everyone I know has big expensive cars, new apartments, sometimes 2 or 3 apartments, and they are mostly middle-class local folk. I just don't get it. Do you?
11 years 17 weeks ago in Money & Banking - China
Bribes and corruption for some, salaries underreported and paid in kind or in cash, quite favorable home loans for some, percentage of gross pay paid by the employer into a housing fund for the employee (not at KFC I'm guessing), neglecting to report certain sales and gains and the resulting tax savings, and mom and dad's money.
I'm sure there is more.
There is also the "year end bonus" concept. I have known some Chinese to make a lump sum bonus (in December or January) that in some cases is greater than their accumulated yearly wages.
I have also had Chinese people (by this, I mean very close family) tell me that they never have to buy or pay for stuff like shampoo, soap, towels, dish liquid, clothes detergent, household cleaning supplies, casual shoes, winter boots, winter coats and pants and their home's electricity. It's entirely possible that their workplace will cover all this with payments and monthly handouts.
Traveler:
They must really laugh at foreign teachers for essentially working for a fraction of what they earn through grey money. I used to get those perks when I first came to China 10 years ago, but they are rare indeed these days.
mattsm84:
They are less rare in second or their tier cities. A lot of the time your employer will still pay for your cab fee, your utilities, your internet and even your apartment. I mean, the apartment is a shit hole, but its still probably about 500 or 1000 a month, which is a lot in a place like Shenyang or Harbin.
I had a girlfriend who always used to get the receipt whenever I bought her lunch or dinner, or we went out somewhere. I found out after a while that she got a refund from her company for "business expenses" which she happily pocketed herself.
mattsm84:
That must have made the people at the restaurant a little unhappy. Where I live, they actually give you a small prize, like an extra drink or a few kuai off your meal if you if you don't ask for the receipt. My wife says that they do it so that they do it to avoid paying taxes.
Scandinavian:
yup, no receipt, no taxes. although I cannot see how difficult it would be to hand out a piece of paper as a receipt without telling the tax authorities. my wife always asks for receipts for her own bookkeeping, but often restaurants will offer to cut off 10-20 RMB of a restaurant bill to avoid paying taxes.
I know that if you rent space in the shopping malls downtown, you will get a normal rental contract with the legal entity owning the mall detailing payments etc, once signed you have to pay "key money" to actually be allowed on you rented area. this key money goes in someones pockets and can be very substantial amounts
bill8899:
Your Chinese friend will introduce you to their friend who wants English lessons? There's a fair chance you friend will be paid for the introduction which, of course, will prompt the student to ask for reduced rates from you. Wall to wall fun, I tell you.
It all comes from a hyper-inflated economy based on loans for building projects no-one can afford. The reason why those who have multiple apartments actually have that is that it is seen as the golden investment opportunity that cannot fail, when in reality, no people need multiple apartments, the markets will crash, banks will close and people will loose their savings. When that happens, those with 3000RMB salaries + free dish soap through their job, will be the new rich in China
mattsm84:
I agree. The Chinese economy is much less stable than most Chinese or even foreigners outside of China think that it is.
oh, another way wealth makes it to the streets. All the government people who have a nice big car or SUV. When they have had it for a while and gotten tired of it, they will pay off their mechanic to say that the car is somehow faulty and should be replaced. Thus perfectly good cars will make it to the market. Of course you need to know how to find these, but an explanation to all the expensive cars on the streets would be that they are second hand and it is the government budget/taxpayers that are getting ripped off.
Ref the apartment thing, I really don't see how people are planning on making a large (or any) profit from property.
I bought a nice apartment in Nanning in a good area. The regulations when we bought it were that it had to be 'decorated' within two years of us receiving the keys. In Nanning (and perhaps the rest of China but idk) you buy an apartment and you get the external walls and windows, a sewage pipe, a water pipe and a single electric source, that is it! So 'decorating' means all the internal walls, plastering, flooring, electricity, bathrooms water, and then painting and furnishing. Our personal tastes on decorating are modern and minimalist, (but we did splash out on quality electronics fridge and furnishings). but the total cost of decorating (remember we did it in a minimalist style) was about 50% of the cost of the whole apartment, and some of our neighbours have spent well over 300% of their purchase cost on 'decoration'.
I just cannot see how anyone expects to make a profit when you are spending an additional 50 - 300% of your purchase cost on 'decoration' especially when that 'decoration' won't be taken into account when it comes time to re-sell. We purchased for somewhere to live long-term, if the value crashes no problem it will still be our home.
mattsm84:
Because its comparatively profitable. Just look at how the value of real estate has increased over the last few years. Remember that there are a ton of restrictions placed on where Chinese people can invest. Economics is all about a relative advantage, and they believe that of there limited option, the skyrocketing price of real estate gives them the best chance to turn a profit on their original investment. What they fail to take into account is that eventually the prices will grow too high, and people won't be able to make payments on their loans. When that happens, its the fiscal Armageddon here.
Scandinavian:
when everyone owns more than one apartment, the supply demand equation will never work out in favor of people trying to make money of stockpiling apartments. there is already too many apartments on the market
the only thing that can tip this is the fact that the locals are hell bent on owning and see renting as "low class"
Bribe the decision makers when placing a bid for certain projects and you win. The favorable deals are made among those with guanxi. When you feel you have enough money for now you spread your wealth to secure more guanxi.
Your employer will buy equipment from a foreign company. You buy the equipment though your separate transfer corporation and sell the equipment to your employer at a premium.
You work at a company and make hiring decisions. Obviously you hire your relatives and friends regardless of qualifications.
It goes on and on.
