Chinese Way of Doing Business: In Cash We Trust

The New York Times’ David Barboza looks at the economic and political reasons why cash is so dominant in financial transactions in China and why the government has never printed in bills larger than 100 yuan:

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.

Doing business in China takes a lot of cash because Chinese authorities refuse to print any bill larger than the 100-renminbi note. That’s equivalent to $16. […]

Chinese economists and government officials often suggest that printing larger denomination notes might fuel . But there is another reason.

“I’m convinced the government doesn’t want a larger bill because of ,” said Nicholas R. Lardy, a leading authority on the Chinese economy at the Peterson Institute for International Economics in Washington, noting that it would help facilitate corrupt payments to officials. “Instead of trunks filled with cash bribes you’d have people using envelopes. And there’d be more cash leaving the country.”

May 1, 2013, 4:56 PM
Posted By:
Categories: Economy, Law, Politics