Imagine you are a car dealer and someone comes in to buy a brand new BMW 5 Series Gran Turismo in cold hard cash. While this may seem strange in America, this is not altogether bizarre in China. Lin Lu, who works in a car dealership in China amusingly recalls the day when” He drove here with two friends in a beat-up Honda,” and “One of his friends carried about $60,000 in a big white bag, and the buyer had the rest in a heavy black backpack.” Although China is very much modernized, it still prefers doing business the old-fashioned way with even potential homeowners making down payments with trunks of cash.
The reason why doing business in China requires so much cash is because Chinese officials have never printed any bills larger than a 100 renminbi note, which is equivalent to $16. Although Chinese officials and economists point to inflation as being a reason as not to print bigger bills, the true reason is because of corruption. With all the corruption and bribery present in China, having smaller bills makes it harder for people to bribe. For instance, if there were bigger bills, instead of having trunks of cash for a bribe, people could get away with just an envelope. “In large parts of China, it still looks like the U.S. in the 1950s: most everything is in cash,” said Jeffrey R. Williams, executive director of the Harvard Center Shanghai and a former bank executive who has worked in China for more than 30 years.
Written by Kevin Zhang