1. How has China been affected by the global financial crisis?
In many ways, China is currently less affected by the financial crisis than other countries, due to its more closed financial system. This has led other nations to urge China to lend a greater financial hand such as increasing its own imports.
2. What makes this credit crisis different from those we have experienced in the past?
Credit crises in the past tended to be confined to the commercial banking and direct lending sectors. With the growth of the securitization market, investment banking firms became big players in the mortgage market, as well. This allowed the risk to spread far and wide, making this crisis that started with sub prime lending in the United States a bank and non bank, as well as a global, problem.
3. Have you got any tips for people about managing their money in today's economy?
As the world continues to experience tough economic times, one wonders how to manage money in such a challenging environment. Even as governments make attempts to ease the financial situation, individuals still need to do their part to save money on a daily basis. Saving money needs to be a priority because this is the only feasible way to survive what has been described as a financial crisis. By considering a few money saving tips here and there, people can witness a significant reduction in their expenditure. Taking control of one's personal finances is the key to financial prosperity.
This control involves establishing where and how your money is managed. People often state that their 'pockets are full of holes' and money constantly vanishes. This escapist attitude cannot survive in the current economy. People need to be accountable and clear regarding the management of their financial resources. Today's economy calls for a strong contingency plan and a new style of thinking in terms of money management.
4. What should we do and what shouldn't we be doing with our hard earned cash in this current situation?
It is crucial to get rid of debt to facilitate financial growth. Monthly debt is a draining situation that is very stressful and can have dreadful side effects on your life if not managed. It does not matter how bad things are you need to make a start at turning things around.
Make sure you pay your credit cards off first and then you can start a savings account or regular savings portfolio. This can be as simple as an interest bearing account or a more complex investment strategy like funds that invest in stocks, bonds and money markets.
There are simple steps you can take to immediately relieve the stress of money challenges. It is important to consider the effect of cutting down on daily expenses. The cost of basic commodities has risen considerably. This calls for changes in your money management that will facilitate substantial saving. Credit cards are regarded as the downfall of many people. They encourage unnecessary spending. The best way to deal with this is by simply leaving the cards at home when you go out shopping. You will only be able to spend what you have and you will not contend with the temptation of buying things that you do not need. If you have several cards try to consolidate them to one card on a small interest repayment.
Eating out in restaurants takes up a big chunk of the average individual or family budget. Cooking at home and carrying packed food is a great way of saving money that would be spent in restaurants. These small changes in spending habits can make a significant impact. It may seem tough at first, but it will soon become an integral part of your life. Start saving pennies and the dollars will take care of themselves.
5. Would you recommend our readers to invest their money?
Yes - Market prices are still low and many stocks and shares are undervalued. In June 2008 the S&P 500 was 1423 and now it's around 1000, the FTSE 100 was 6300 and now its 5250. In the US alone there is currently around $9.5 trillion sitting on the sidelines in money market accounts, cash deposits and savings accounts. And the thing is that $9.5 trillion isn't earning anything for its owners. It is this cash that will fuel the next move higher for stocks and good reason for investing now.
6. If so, what would you suggest they invest their money in?
There are many many investment vehicles and opportunities out there, but not all investments are suitable for everyone. The key here is the amount of investment risk you are prepared to take with your money; the length of time you are prepared to invest for and liquidity. It is important that you invest into something that will allow you to sleep at night. If you are a low risk investor then make sure you invest into low risk investments such as Money Market, Government or High Grade Corporate Bonds. For those investors who have a balanced or higher attitude to investment risk then you can access a portfolio of asset classes such as cash, bonds, equities, property, commodities and alternative investment funds. The difference between balanced and high risk is down to the asset allocation, if you are a higher risk investor then you would allocate a higher percentage towards equity based funds. There are a number of structured investment products currently available that invest into equities with capital guarantees, these are generally for an investment term of 3 to 5 years but are not suitable for anyone who wants liquidity.
Saving on a regular basis is very popular with the expatriate community, this allows you to invest an agreed amount each month over a number of years, the minimum being 5 years, you can invest into a wide range of asset classes and as you are investing on a monthly basis you can take advantage of cost averaging, this means that if the market price falls then when you buy in the next month the units are cheaper and you get more for your money, when markets rise those extra units that were purchased will be worth more and the overall effect is that your investment will be of a greater value. A regular savings plan is ideal for retirement planning, education fees or simply building a nest egg for the future.
7. How strong is the RMB at the moment?
This really depends on how far back you go in history. The first major forex reform was in 1981. The RMB forex rates more than doubled from 1 Yuan to 2.7 Yuan for one US dollar, offering a strong boost to exports. By the end of 1984, forex reserves began to rise. In 1985, trade and non-trade foreign exchange were put together. The official RMB exchange rates and foreign exchange markets were unified in January 1994. Making Moves towards making the RMB tradable under the current account. And then there was the reform of the forex regime in 2005. Through a gradual process, the reforms in China's forex regime are going in the right direction and the RMB is strong against other currencies and will probably get stronger.
8. More & more people are using a credit card due to declines in real estate value and the loss of home equity as a source of funds. What would you say to consumers who are turning to credit cards as the only available means of maintaining purchasing power?
Credit cards were originally designed in the 1950's for people to pay the full amount owed at the end of the month. Today people are using them for everyday purchases such as food, clothing and petrol and using the card as a substitute for cash is a habit that can quickly lead to debt.
Often people just pay the minimum payment which leads to a longer amount of time to pay off the debt and also increases the amount of interest you end up paying. For ordinary purchases, leave your credit card in your wallet and use cash or a debit card instead.
Do not use your credit card to buy things you can't afford. Living a borrowed lifestyle is the quickest way into debt. If you can't afford a purchase today, chances are you won't be able to afford it tomorrow or the next month.
If you are to use your credit card ensure that you pay off the full amount at the end of the month as interest rates on credit cards can be as high as 30%.
9. Do you have any tips that will help those planning to retire in the near future?
If you are considering retiring in the near future you should already be shifting assets to a more conservative portfolio.
Retirement funds should never be placed in high risk because this can end up causing a loss of investment capital, and therefore you will have fewer saving to live on in retirement. Slow steady gains are much better than volatile up and down swings when it comes to market and portfolio performance.
Capital preservation is your number one priority so look at potential investment vehicles such as government bonds, fixed interest and cash deposits. Everyone has a different idea of what they want in retirement so the best option is to speak to a financial adviser about what options are available and the most suitable.
10. I have read that there is and will continue to be a large number of unemployed new graduates. Do you have any advice to offer these young ex students?
Too many college graduates are facing a very hard reality check this year: having a degree does not translate to having a great job offer immediately. In fact, searching for and interviewing for jobs doesn't translate to finding employment, either.
It's estimated that approximately 20% of college graduates who have begun applying for jobs have found one. This puts the class of 2009 way behind those of 2007 (51%) and even behind last year's graduates (26%).
Due to the increased competition from the ranks of the experienced unemployed and last year's graduates who remain jobless, the job outlook is unlikely to turn around quickly for many people with new degrees.
Below are some ways to increase your chances of finding employment if this situation describes your predicament.
- Network. Make sure people know you are looking for work, and that you are flexible. Use your connections; attend as many job fairs as possible, have your friends keep you in mind when positions open up in their own companies, etc. Communicate to your (growing) network of professional contacts and relations what your skills, talents, and desires are.
- Apply like crazy. Work hard on each application, and don't waste time applying for positions you know you really don't qualify for. Consider stretching your geographic boundaries or even your professional description. Sure, you may be qualified as a science researcher, but if a business needing a consumer researcher thinks you fit the bill, give it a try. Searching in related fields boosts your chances of finding something at least partially relevant that still utilizes your training and abilities.
11. What would you say to an American living in China who was getting paid in USD? Would it be more beneficial for them to be paid in RMB?
This depends on a number of factors; if you spend a majority of your salary here in China then it may make more sense to be paid in RMB. Your RMB is exchangeable into foreign currency as long as you can show the tax paid on the full amount whilst working in China.
If you are only planning to stay in China for a short period of time with the aim of returning back to your home country, then maintaining your salary in your home currency may make more sense especially from a savings point of view. When you return home you do not have to worry about exchange rates or transfer limits, whilst here in China, USD can also be transferred into RMB by most banks although this is limited to a maximum of 50,000 USD per year.
If you are going through renegotiation terms with your company and there is an option to be paid in RMB then it may be wise to ask for a fixed exchange rate equivalent that does not leave you exposed to currency fluctuations.
However, this would be dependant on the company and whether they are prepared to pay you in RMB.
12. Can you offer any advice to expats?
Whilst it is important to enjoy your life style living as an expat you should remember the reasons why you decided to come offshore. Most expats I meet will say that the main reason for moving away was for financial reward i.e. money. However from my experience many expats are so busy with their own work that they do not have the time and probably in most cases the knowledge to deal with this. Therefore seeking proper independent financial advice with a reputable financial adviser is paramount to your financial goals. Ask the adviser what qualifies them to offer financial advice? If the adviser holds a financial planning certification then ask to see a copy, if he does not then I suggest that you find an adviser that does. At the end of the day when you return to your home country it's not about how much you earned as an expat its all about how much you saved!
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