Go Ahead And Quote Me: $100 = 100 RMB

Dan,

Couldn't agree more on this point! It took me more than a year to realize this point and lost a lot of money in the meantime. Once I realized what my Chinese counterparts were thinking in regards to money, it changed my success rate.

I have to disagree. The concept of understanding local money and the ideas about money are certainly true and valuable. But the equation of 100RMB with $100 is a big stretch. You can remember the first time you saw a $100 bill, I dare say. No Chinese under 50 could tell you about the first time they saw a 100RMB note. They are just too common.

A couple more examples.

First, in my neighborhood in Shenzhen our ATM's only spit out 100 RMB notes. To be honest, in all the other 10 provinces in China where I've done business I've never seen any other ATM spit out anything less than 100's either. Imagine if the only bills you could get out of ATM's in the US were $100 notes--it would make getting cash from the ATM almost worthless. Many gas stations won't take $100 bill in the US. Ditto for many stores if you're buying less than $20 dollars worth of goods/services. Now, zip back to China and try paying for your 12.5RMB taxi ride with a 100RMB note. No problem. How about a single Coke at the Circle K with a 100RMB note. Again, no problem. How many times do you go out to lunch or dinner with Chinese friends and they stop at the ATM and get out multiples of 100RMB bills? Everyday? Yea, me too. How many times has that ever happened in the US?

Second, dealing with cash for Chinese is very different depending on what part of China you are talking about. Maybe the 100RMB note is a big deal for the 600 million peasants. But what about the 400 million urban residents? Not so much. If office workers in China spend 12-15RMB per lunch on fast food that would, under the above assumption, mean that Americans are also spending $12-$15 dollars per fast food lunch. But a set meal at a western fast food place in China cost 20RMB or more and only $5 in the US. Even a mom n pop shop next to your office building in the US isn't going to be charging $12-$15 for lunch sets. A nicer sit down dinner, yes, sure.

If the Chinese middle class are making $750 a month (about 5000RMB) and the average American is making $3400 a month (about 23,000RMB+) The exchange exchange across cultures is less significant that this comparison would lead on. It's the difference of carrying around 50 bills in your wallet verse 34--about a third more!

Further, how difficult is it for Chinese to have to deal with the fact that they love to use (are used to using) cash for all transactions and have only 100RMB with which to do so?! Have you ever paid for a car with cash? How about a fridge? A TV? A microwave? Many, if not most, Chinese have. The 100RMB is not so much a treasure that is rarely seen, but an inconvenience in this newly expensive world.

Finally, the US offers a $10,000 note.

I'm with David. Perhaps in Jack Perkowski's circles people regularly use $100 bills to light cigars and stuff into lap dancers' knickers, but they are not readily accepted by the general public. As for PPP, $100 buys a lot more than 100 yuan. The reason Perkowski's Chinese colleagues thought $10 was too much to spend on a haircut is cultural, not economic: have you ever seen the haircuts on these guys? They make Bill Gates look stylish. And think about the lowest price for a beer in the diviest bar: 10 yuan or so in Beijing, but certainly less than $10 in the US.

A much better (although still of course imperfect) equivalent in terms of cultural significance would be the US$20 bill.

I also want to add my two mao......our company moves expats in and out of China. I need to communicate with the expats 50% and the Chinese 50%. When we are negotiating a quote for a move from China to the states and the difference in price between us and the competitor is RMB 500 to 1,000, most expats may not care about the price difference and go with the higher price because they recognize and have used our company in the past. But, in many companies, the bottom line is cost and when the Chinese HR manager (in a foreign company), who makes the final decision and is making RMB 2,000-3,000 a month, can save their company RMB 500 to 1,000, they will do this because they see the cost as half their salary and a good amount of money. Now, if this same situation was in the states and your salary was US 2,000-3,000 and you could save your company US 1,000 you most likely would choose the lower price.

What I saw in the original post was a re-worded version of what I always tell newly arrived expats/tourists: Don't think in terms of your home country's currency, that's the quickest way to get screwed. Too many people think in their home country's dollars/euros/pounds/whatever and automatically convert prices back to their home country's currency, comparing that with what they'd pay for the same item back home. You come from a Western country (or HK, Taiwan, South Korea, Japan) and do that, everything seems super cheap all of a sudden. But it isn't cheap, really. Or, to try to sound all intellectual-like: People coming to China need to see the RMB as a representation of value in the Chinese economy, not as some quaint local equivalent of this thing they call "money" back home.

Oh, and don't forget China is a cash society. Back home in New Zealand, at least last time I was there about 6 years ago, ATMs dispensed $20s and..... why the hell were you bothering with ATMs when you can swipe your card at the EFT-POS machine in basically any store? In a society where everything is done electronically, you're naturally not going to see too many $100 bills (and when you do, remember they're plastic- they can be washed, but don't iron them, they tend to melt). In a society like China where cash is king (and my boss still pays me in cash, but that's as much my reluctance to open yet another bank account so he can pay me electronically as anything else), it's only natural you'll see more 100s. Still, when I was a kid in NZ helping my parents count up the tithes from church, I saw a few 50s and 100s- they were held up for all to behold in awe. Those few $50 and $100 notes that found their way into the collection plates represented such a fantastical amount of money! Oh, yeah, most people giving that kind of amount would pay by cheque, something that never seems to have taken off in China.

If you'd like, check out Jack's more in depth explanation of the $100=100RMB phenomenon in his own words in our podcast here:

http://www.bizcult.com/content/?p=460