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Overview of private banking in Asia part 2

This is the second part of Overview of Private Banking in Asia, for part 1 click here.

Singapore

Opening an account for non-residents is easy and straight forward. One of the biggest advantages in dealing with Singaporean banks is complete absence of the language barrier -- since English is one of the four official languages in Singapore, all the communication, both written and oral, is conducted exclusively in English. Upon opening an account you are issued an ATM card that is part of global PLUS system that allows cash withdrawals worldwide. Make sure to set the maximum withdrawal limit while you are still in the bank if you plan on using this facility outside of Singapore.

Credit card can be issued to residents only and if you cease to become one, the card will not be renewed. One way to avoid it (if you were once a Singaporean resident) is to maintain a local mailing address in bank records.

There is a minimum threshold requirement, normally SGD 200 above which the monthly administration is waived.

Web banking is very convenient and secure -- in order to log in, you need your user name/password combination along with a special electronic device that generates a code which must be entered every time you log in. Online banking can handle local and overseas fund transfers and various bills payment.

Hong Kong

By far, Hong Kong offers the best private banking system in Asia. Like in Singapore, all the communication is in English (in fact, every document is bilingual with English and Chinese side by side). Practically, every bank employee speaks fluent English and their efficiency is excellent. 

Hong Kong bank issued ATM cards participate in PLUS system and can also be used for local purchases, just like a normal debit card. Credit card will not be normally issued to a non-resident, however if you are a resident at the time of applying for it, even when you leave Hong Kong, the cards will remain valid and can be renewed no matter where is your new address.

Internet banking is similar to Singaporean one in terms for convenience and security but has more features. The local and overseas fund transfers are easy but for large wires you need to make prior arrangements via written correspondence with the bank. If you want to facilitate easy transfers between Hong Kong account and your other accounts overseas, I recommend filling up the authorization form in the bank that sets the maximum allowed amount (you can set whatever you feel comfortable with).

One of the strongest advantages of dealing with Hong Kong banks is a possibility to invest in a large variety of mutual funds directly from your online account. You can monitor your investments, buy, sell or switch funds at a click of a mouse -- all easy and secure.

The bank will e-mail your regular statements along with mailing paper version to you anywhere in the world, they will courier your credit cards to you for free regardless of where you live. Practically, every issue can be handled online or by phone. You can live outside of Hong Kong for years and still being able to actively manage your account without ever setting your foot there.

In conclusion, Hong Kong bank account is a must for every expat living in Asia -- if you still don't have one, make sure you get it next time you are there.

China's property bubble -- false prophet Gordon Chang is back

Continuing the earlier discussion on Chinese property bubble: there is no shortage of doom and gloom prophets around these days. One of them is the infamous Gordon G. Chang who has recently published the article in Forbes.com called "China's coming property bust".

Gordon G. Chang is the guy who, in his book "The Coming Collapse of China" published in 2001, predicted total collapse of Chinese financial system along with its communist government by 2006.
Now he is sharing his "insights" into real estate market... This is what he wrote:

“Even if I don’t eat for the next 50 years, I still won’t be able to afford a flat in Shenzhen.” As we were stuck in traffic last Sunday in his bustling hometown, a cab driver has just identified why the Chinese property market is the world’s biggest bubble at the moment. He makes a maximum of 4,000 yuan a month, but an apartment for his wife and two children will cost about 250 times that amount. The chubby dad has given up dreams of owning his own home in this southern China metropolis that borders Hong Kong. 

Prices for apartments in China are seriously out of whack. They were rising this year at the rate of 20% a month in some regions. Overall, residential real estate prices soared 68% in the first quarter of the year, compared to the corresponding period last year. In the second quarter, prices were up 12.2% from the first quarter, according to Nasdaq-listed China Housing & Land Development Inc. China is the world’s fastest appreciating property market" etc. etc. etc.

For the full article go here: China's Coming Property Bust

This is what I think about it: real estate market in China is certainly overheated in the 1st tier cities and meets "bubble" criteria. The question is whether the bubble will pop or deflate. I don't believe in any real estate market crash but the prices seem to peak and will most certainly fall. The rapid property prices increase in those cities was largely fueled by domestic investors unlike in US where real estate market was out of control because of irresponsible lending by banks. In China, the situation with mortgage lending is completely different and the banks are much more conservative and much better capitalized than in US before the financial crisis.

Since April this year banks were instructed not to lend mortgages for 3rd property and only finance up to 50% on the second purchase. These measures are turning investors away from this market into more profitable areas. This is why the market will most likely cool down instead of crashing.

The article makes a point based on author's enlightening conversation with Shanghai taxi driver complaining that he couldn't afford an apartment there. I could assure him that an average New York taxi driver is unlikely to afford an apartment in Manhattan, the same goes for London, Paris, Seoul, Tokyo etc. It has nothing to do with the actual condition of the real estate market in any of those cities.

Authors like Gordon G. Chang simply don't know what they are talking about -- he is just trying to make a buck on pure sensationalism, he has learned the system well after making fortune on his so called book about China collapse in 2006...

Overview of private banking in Asia part 1

The following discussion provides an overview of private banking in Asia for expats. All the information is based on my personal experience of living in several countries in APAC and could certainly be helpful for expats who already live here or are considering relocation.

My most recent and by far the worst experience has been with dealing with Mainland Chinese banks. In my previous blog I briefly discussed some inconveniences related to such basic feature as ATM card and the number of pitfalls associated with it. The major inconvenience with bank account in China is transferring money overseas which has also been discussed before.

Another problem is the web access to your account. Even if you manage to install the required software on your laptop or PC, bear in mind that the features would be very basic, such as balance check only. However, setting your web banking can be either very complicated or outright impossible feat to accomplish. The software, that your are required to install, would most likely work properly only with Chinese based operating system, even if the interface has an English option. Most software require USB lock device installation and would only work with the computer you have installed the software on. So, if you ever have to reinstall your OS, the whole process must be repeated, not to mention that losing your USB lock will require a trip to your branch and a waiting period of at least 10 business days before you can get a new one.

Next -- banking in Korea. You can open an account in one of the major banks in Korea quite easily but I would only recommend doing it in Seoul: in smaller cities virtually no one speaks English in the banks. Transferring money overseas is doable but complicated, although not as bad as in China. You need to go to a branch personally to sign a ridiculous amount of paperwork, your passport will be scanned and stamped with a special chop since there is an annual limit of how much money you can wire overseas. Again, local help is highly desirable unless you are dealing with one of the downtown branches in Seoul where many bank clerks do speak decent level of English.

Banking online is by far the most secure I've ever seen with many levels of encryption and protection which also makes it the least convenient. However, it allows you to do quite a few transactions such as paying bills, services and transferring funds to individuals within Korea to any bank. Also you need a special code card in order to perform these types of transactions. The card is convenient to carry around and you can keep a backup somewhere in case you lose it. The major problem is that every year you have to renew your web banking license -- a special file that is stored in your computer. The renewal process is extremely convoluted but can be done online. However, I found that it only works properly in Korean version, at least in Kookmin Bank that I'm most familiar with. So, once again, you need a Korean speaking/reading buddy to help you out with that. And one more thing, the browser support for Firefox or other browsers could be a problem, so stick with IE.

The biggest problem I've encountered with Korean banks is that their ATM card is useless outside of Korea! Even though it shows PLUS logo on it, it usually doesn't work overseas. You will find out that most ATMs in other countries would refuse your transactions, although cash advance feature of credit cards should work.

The last thing to bear in mind is that once you have passed the immigration in the airport in Seoul or Pusan, there will be no any ATMs on the other side. This means that you need to get your cash before passing passport control. This has to do with certain restrictions of Korean government which I'm unable to comprehend.

Next will be an overview of banking in Hong Kong and Singapore.

Banking in China - do it as little as you can

There are dozens of banks in China for private and business accounts, so you are presented with quite a choice in case you need to open one. The problem is, however, that none of them offers any decent level of service, convenience or standards most of us are accustomed to.

First the good stuff: opening an account is easy -- just a matter of filling out some forms, copying your passport, visa and paying a few pennies for the ATM card. The ATM card can be used for regular withdrawals, paying for purchases using Union Pay system (similar to PLUS or Maestro) and checking your balance. Union Pay system is universally present all over China and has spread outside as well -- you can easily withdraw cash or even pay in shops in Hong Kong, Macau, Singapore and perhaps elsewhere as well.

However, here is what you need to know -- if you lose your ATM card, the bank won't reissue it right away as one might expect. It will take at least 10 business days, or 2 weeks! In the meantime, not only you won't be able to enjoy the convenience of ATM -- you won't be able to access your account at all, even at the bank window! A bank teller won't be able to help you with any transactions including getting money out of your account because, believe it or not, they need your card! It doesn't matter if you have your passport with your picture in it, your bank account number, maybe even your bankbook -- they would be just staring at you with a typical blank look on their faces and you won't get anywhere.

There is only one way out of this situation -- personally knowing someone high up in this specific bank or branch, such as branch manager or one of their 10,000 vice presidents, then things can be settled in a matter of minutes. If you don't know anyone like this -- you are out of luck and just have to suck it up for another two weeks. 

Most people don't know about another tricky aspect of this ATM card -- it only allows 6 attempts with incorrect code before your account is blocked and the card must be reset. Now, you might ask -- what kind of an idiot would attempt typing a wrong code 6 times in a row? The catch is that it isn't 6 times in a row but it is 6 times since you got your card! You may have had your card for 10 years and if during this time you typed your code incorrectly 5 times (maybe had too much beer one night and the key was stuck on another occasion) and today you are in the airport trying to get some cash before a week long trip overseas while your finger slipped on the keypad -- oops, your card instantly becomes useless!

Transferring money overseas is another nightmare -- as a foreigner, you need to provide your original work contract, salary slips and the original stamped paper from the tax authorities showing all the taxes that you have paid. All this is required in order to convert RMB to USD or any other hard currency that can be wired out of China. The workaround does exist: you can ask a local colleague or a friend with Chinese ID to do that for you, however some may be reluctant to help as such transactions may attract the unwanted attention of tax authorities. Besides, there is a limit on the amount that can be transferred overseas by locals and some could be planning to use it for their own needs.

In conclusion, my advise is to do as little banking as possible in China by keeping the account in your home country active or opening another one in a convenient place near by, such as Hong Kong or Singapore. More about this later on.

Real estate investment situation in Chinese cities

There have been a lot of recent speculations in Western media about the inevitable collapse of Chinese real estate investment market causing the entire economy to crash, and, in turn, pulling the world economy into new recession. The parallels are being drawn with what have caused the most recent global financial crisis, namely US mortgage market collapse.

In my view, these predictions are highly exaggerated and it is unlikely that A -- the real estate market in China collapses, and B -- that any troubles in this market will have any substantial effect on Chinese economy. There are several reasons to this view: first, there are no equivalents to US-type subprime mortgages in China and the banks' lending is, and has always been, fairly conservative. Home buyers still have to come up with 30-40% down payment on their first purchase and those rules are still being gradually tightened. This means that even a significant price drop poses little threat to well capitalized Chinese banks.

Since April 2010, lenders in big cities such as Shanghai and Shenzhen have adopted new rules: the second mortgages are only available with the minimum 50% down while buyers of third properties, clearly the investor category, can't get mortgages at all. These measures will certainly help "deflating" the real estate bubble other than bursting it.

There are no signs of any significant price yet drop but it is clear now that the prices will eventually fall in the next few months. Considering the fact that real estate prices have climbed by about 40% (or more for some areas) since the beginning of 2009, it only makes sense. It is apparent that many construction sites have simply been abandoned as developers failed to sell enough apartments to finance continuing construction. In Shenzhen, where I live, this is quite a depressing view -- many of those abandoned buildings stand in central areas, popular with wealthy residents and businesses which are, understandably, quite unhappy about it. If the construction will not resume in the next few months, after being exposed to the elements, those buildings will have to be demolished. I can only imagine how many people will be losing their investments this way... 

Looking at what is going on in the real estate market, those investors whose apartments are still under construction must have many sleepless nights. There are huge areas under development in Shenzhen and it seems quite unlikely that thousands of those new units can be quickly populated once completed.    

I'm going to update this blog with any more news on the real estate market in China but what is clear now is that it's a bad time for real estate investing, however there is still very little chance of larger fallout that may affect Chinese economy at large in any significant way.