On getting paid in wads of cash in China

While your humble blogger remains jet-lagged out of his gourd adjusts back to the Western hemisphere, he strongly encourages you to read this fantastic David Barboza story in the New York Times on the predilection in China to use cash for … well … everything:  Lugging nearly $130,000 in cash into a dealership might sound ...

While your humble blogger remains jet-lagged out of his gourd adjusts back to the Western hemisphere, he strongly encourages you to read this fantastic David Barboza story in the New York Times on the predilection in China to use cash for ... well ... everything

Lugging nearly $130,000 in cash into a dealership might sound bizarre, but it’s not exactly uncommon in China, where hotel bills, jewelry purchases and even the lecture fees for visiting scholars are routinely settled with thick wads of renminbi, China’s currency.

This is a country, after all, where home buyers make down payments with trunks filled with cash. And big-city law firms have been known to hire armored cars to deliver the cash needed to pay monthly salaries.

While your humble blogger remains jet-lagged out of his gourd adjusts back to the Western hemisphere, he strongly encourages you to read this fantastic David Barboza story in the New York Times on the predilection in China to use cash for … well … everything

Lugging nearly $130,000 in cash into a dealership might sound bizarre, but it’s not exactly uncommon in China, where hotel bills, jewelry purchases and even the lecture fees for visiting scholars are routinely settled with thick wads of renminbi, China’s currency.

This is a country, after all, where home buyers make down payments with trunks filled with cash. And big-city law firms have been known to hire armored cars to deliver the cash needed to pay monthly salaries.

For all China’s modern trappings — the new superhighways, high-speed rail networks and soaring skyscrapers — analysts say this country still prefers to pay for things the old-fashioned way, with ledgers, bill-counting machines and cold, hard cash.

Many experts say it is not a refusal to enter the 21st century as much as wariness, of the government toward its citizens and vice versa (emphasis added).

Now you should definitely read the whole thing, but a few thoughts here: 

1) From a personal perspective, as the occasional visitor to China, I can confirm the wads of cash thing — but it’s a bit more complicated than Barboza suggests. First of all, for U.S. academics at least, the payment isn’t in renminbi, but in U.S. dollars. Renminbi is sometimes dispensed for things like per diem reimbursements, but not for honoraria. After all, officially, the RMB is still not convertible to dollars outside of the country, so it wouldn’t be very nice to get paid in a currency that is technically useless outside the People’s Republic.

There are two other qualifiers here. First, at least with respect to academic honoraria, it’s not just China that pays in cash — so does Japan, for example. Second, speaking as an academic who’s received the occasional honorarium, it’s friggin’ awesome. At some point, someone takes you aside and gives you an envelope stuffed with bills. I know it’s impolite to say, but every time it happens, I feel like I’m an earner in Tony Soprano’s crew. It’s soooooo much more satisfying than getting a check (as is the norm in the U.S.) or receiving a bank transfer three months later than it should be and only after haranguing someone a few times (as is the norm in Europe). 

2) The more substantive point of Barboza’s story is how the cash-based system reflects the degree of distrust between the government, Chinese citizens, and the financial system. From a global political economy perspective, this cuts in two directions. On the one hand, it suggests that the effects of a real estate bubble popping in China might have a muted effect on the broad mass of Chinese. After all, if they’re holding their assets outside the financial system, then their bigger fear will be currency-gnawing rats (read to the end of Barboza’s story) than banks closing. 

On the other hand, it’s worth reading articles like this whenever someone suggests that the renminbi will soon be a challenger to the U.S. dollar as an international reserve currency. For that to ever truly happen, China’s capital account will have to be one hell of a lot more transparent and liberal than it is now. As it turns out, even China’s Superbank isn’t actually that super once one digs into the numbers. And if Chinese citizens are trying to avoid dealing with China’s financial system and the renminbi, then I seriously doubt global capital markets are going to embrace the RMB as a rival to the dollar. 

Daniel W. Drezner is a professor of international politics at Tufts University’s Fletcher School. He blogged regularly for Foreign Policy from 2009 to 2014. Twitter: @dandrezner

More from Foreign Policy

Oleg Salyukov salutes to soldiers during Russia’s Victory Day parade.
Oleg Salyukov salutes to soldiers during Russia’s Victory Day parade.

Stop Falling for Russia’s Delusions of Perpetual Victory

The best sources on the war are the Ukrainians on the ground.

A fire rages at the Central Research Institute of the Aerospace Defense Forces in Tver, Russia
A fire rages at the Central Research Institute of the Aerospace Defense Forces in Tver, Russia

Could Sabotage Stop Putin From Using the Nuclear Option?

If the West is behind mysterious fires in Russia, the ongoing—but deniable—threat could deter Putin from escalating.

China's Foreign Minister Wang Yi is received by his Kenyan counterpart, Raychelle Omamo, in Mombasa, Kenya.
China's Foreign Minister Wang Yi is received by his Kenyan counterpart, Raychelle Omamo, in Mombasa, Kenya.

While America Slept, China Became Indispensable

Washington has long ignored much of the world. Beijing hasn’t.

A bulldozer demolishes an illegal structure during a joint anti-encroachment drive conducted by North Delhi Municipal Corporation
A bulldozer demolishes an illegal structure during a joint anti-encroachment drive conducted by North Delhi Municipal Corporation

The World Ignored Russia’s Delusions. It Shouldn’t Make the Same Mistake With India.

Hindu nationalist ideologues in New Delhi are flirting with a dangerous revisionist history of South Asia.