What are my RMB investment options?on Friday, 19 October 2012. Posted in Investing in China, Investments
1. Bank Deposits – You can put your money on despoit. It’s easy, low risk and tiny return.
2. Structured Deposits – More complicated than the “guaranteed return” your banker tells you it is. It is worth understanding that there is often some hidden risk in these products. More like Structured Products and often mis-sold on many occasions, in our experience as low risk investments. Be cautious here. And yes, we do find it odd that normal investments are out of bounds, but the truly bleeding edge ones from overseas are just fine.
3. RMB Funds – Only to Chinese nationals, so as long as you have a Chinese husband or wife AND like the Chinese stock market, then you are all set. You can buy through the bank.
4. RMB Unit Linked Insurance – Fine for foreigners to buy and cheaper than what the cold callers sell, but it does have downsides. The two big ones are transparency, you only get a choice of risk “High, Medium or Low” is the only decision you will make. The second is that your investment is largely tied to the Chinese stock market, so you have very little choice.
5. RMB Trusts – Nothing like overseas trusts, these little structures can do almost anything, if you have 1 million RMB and happy to wait for 2-3 years. You can buy direct state owned enterprise corporate bonds, local government debt, private equity and venture capital, property and even hire a private manager to gamble away on the Chinese stock market. Almost anything you want. You will need to do your due diligence and read Chinese because this is “caveat emptor” territory. Buy these from brokers like us, trust companies or banks.
6. Property – Buy one property to live in, as long as you have been here a year (or whatever the rule is today). We don’t expect restrictions on multiple properties to be eased any time soon – foreigners are a nice little punching bag for easy political points. We also believe that the Chinese government trying to cool the property market. Standing in their way is not often a good decision. Case in point the government is rolling out a new property tax with a database to check, across 40 cities, that you don’t have a second property.
For our money overseas options are still better given their ready portability. RMB convertibility has been “coming” for a long while now. Chances are it will be a while yet. However if you must invest in RMB, then Trusts and Unit Linked Insurance are the more interesting options and we will go through these more in future posts.