School Loan Deferment

How much money should I Bring?

Salary

Payment Methods

Travel Bonus

Holiday Pay

Airfare Reimbursed

Foreign Exchange Rate

Banking

Wire, Sending

Wire, Receiving

Common Expense

Food Expense

Local Travel Expense

Taxes

Financial Considerations & Cost Analysis

Teaching in China, Working in China

Financial Planning and Budgeting yourself while living and working in China.

By Keith M Curran

Do you have car payments?  An apartment to sublet?    Have you given serious consideration towards planning how you will deal with these payments, school loan deferments and every day expenses?  If you need to make payments back home, you can discuss this with our agent.  She can arrange for up to 60% of your earnings to be converted to US Dollars.  We can also assist you with wiring money to your accounts in the USA.  In any case, you should have a responsible person whom you trust to take care of any outstanding finances or bill payments.  

First things First:

From most western perspectives, initially everything is viewed as being inexpensive or cheaper.  Compared to most western prices and cost of living standards - this is true.  Comparing a Chinese wage to the costs of living; unit for unit almost everything is more expensive.   Bottom line, when in China - do as the Chinese do.. Haggle for prices in the market..  Look around before you buy..  And be prepared to walk away if the price is too high..  You will find that a merchant is sometimes willing to negotiate lower after you walk away.  Sometimes just being a foreigner will send the price of goods soaring.

School Loan Deferments:

Most student loan providers offer you a six month grace period to begin repaying your student loans.  This period begins once you have graduated or disembarked from your university.  For those individuals having student loan payments who wish to gain valuable work and life experience in China, there is a way to defer the loan payments further.  The salary you earn in China will likely not cover the monthly loan payments and your cost of living.   If you show your contract with the school, along with the Chinese tax document used by the schools to make your salary payments, most loan providers will allow you to extend your deferment.  You must contact them directly for their detailed information.  If you have a federally subsidized Stafford loan, the government will pay the interest on your loan while it's in deferment.  Click here to read more. 

Back to Beginning

How much money should I Bring?

Semester Teachers - you should be prepared to bring between $400 - $700 US dollars.  Enough to support yourself for the first month of work before you receive your paycheck with some in reserve in case of small emergencies such as Illness, clothing issues, etc.. Plan to bring this money in CASH.  Travelers Cheques, and western ATM Bank cards often will not work in the smaller cities.  You can deposit your cash into your new bank account after you arrive.  Summer teachers - bring as much as you are willing to spend, $600 is usually enough, only you know your spending habits, bring too little money and you'll be borrowing from your peers.  Avoid an embarrassing situation and bring enough to support your spending habits.

Back to Beginning

Salary & Payment Methods:

Your salary is paid on a monthly basis usually on the 10th of each month.  The salary is paid in Chinese currency called Yuan, or popularly known as RMB.  The symbol for Chinese currency is ¥.  If you start your contract early, your salary will be prorated accordingly to reflect the extra days you worked.  If you arrive after the pay day, your salary will reflect the absence of those days between the payday, and the date you actually started teaching.    Salary considerations are based on several factors:  1) Your education & Experience, 2) School Demographic Location. 3) The number of periods you work each week.

Payment Methods:

There are two ways of payment in China. 1)  You can have funds direct deposited into your bank account. We will help you establish a bank account a few days after you have arrived and after you have received the local orientation.  It is not uncommon for the first direct deposit into the bank account to be 1-3 days late.  2)  You can receive your pay in cash.  The school accountant will issue you an envelope each month.  You are required to sign a document saying you received your salary.  

Back to Beginning

Travel Bonus:

A standard travel bonus would be 1250 payable each semester.  2,500 Rmb 1-year.  This is payable at the end of each semester to those teachers in good standing that desire to travel during the holidays or vacation.  In some cases, teachers who have arrived late into the program or during the middle of the semester will have these bonuses prorated. 

Back to Beginning

Holiday Pay:

Is paid at the beginning of the second semester after the long Chinese new year, and is usually pre-negotiated with the school.  Holiday pay ranges from half of one month salary to one month salary and varies from contract to contract.   Teachers arriviong late into the program or during the middle of the semester can expect bonuses to be prorated. 

Back to Beginning

Return Airfare Reimbursement:

Return Airfare reimbursement (Approximately 3800 Rmb) is pre-negotiated with the school and detailed within your contract. You should receive the airfare reimbursement at the beginning of your second semester along with your holiday pay.  In some cases, teachers who have arrived late into the program or during the middle of the semester will have these bonuses prorated. 

Back to Beginning

Banks:    Foreign Exchange Rate:  $1 = ¥ 8.0 = .12345

There are two banks we suggest our teachers use.  ICBC - Industrial & Commercial Bank of China.  or Bank of China.  Both banks are easy to setup accounts and offer high quality, reliable service.  You can have multiple dollar and RMB accounts and use one ATM bank card to access the funds.  At this time you can not extract dollars from your Chinese ATM Card, even if you have a dollar account.  You must enter the bank with your bank book, and passport. 

Back to Beginning

Money Wiring: Sending

Sending money out of China is not easy.  It requires a number of tax documents from your school and most schools do not have this kind of experience.  Depending which country you are originally from.  It may be expensive to wire money back to your home.  Usually Chinese currency is converted to USD and then again into the currency of your country.  We can assist you with wiring money in two easy steps.  Complete the form, submit money to our bank in China.   We will release the funds from our American bank to your institution.  As a teacher in our program you can sign up for this service and the fee's will be less then the multiple conversions.. 

Back to Beginning

Money Wiring: Receiving

If you require someone to wire funds into your Chinese bank account you will need the following information.  1) Account Number 2) Name on Account 3) SWFT number and Branch Location.  Because the Chinese currency is non-coverable in the money market - the person wiring you money must send in local currency, such as Euros or US dollars.  The new balance will not be found by using your ATM card.  In most cases you will need to enter the bank with your booklet and identification to check the status of the wire transfer.

Back to Beginning

Taxes: UPDATED 03.30.2006 Income Tax Threshold Raised for Foreigners  If you are a new teacher coming to China and expect to earn less than 4,800 Rmb per month. You have no tax liability in China or in the USA.

Foreigners working in China have to pay personal income tax only if their monthly pay is above 4,800 yuan (US$592), up from the previous threshold of 4,000 yuan

There is a lot of confusion surrounding the law of taxes and if teachers should pay taxes back home, or in China..  We have prepared a detailed list of resources and material on this subject but to keep it simple, you are totally exempt from taxes the first 90-days in China.  Everything you make over 4,800 Rmb requires you to pay a tax on ONLY the amount above 4,800 Rmb.  The tax starts at 15% and increases proportionally with the wage.  When offered high salary it becomes very necessary to weigh the differences between working in Shanghai making 6,000 Rmb at 30 periods / wk versus making 3800 in a smaller town working only 16 periods. 

Additionally to avoid double taxation, teachers, lecturers and researchers may be exempt from Chinese income tax for one, two or three years.  You can purchase a copy of the tax treaties published by the State Administration of Taxation for 360 Rmb. 

"Agreements for the Avoidance of Double Taxation (Volumes I through VI)"  ISBN 7-80117-224-8/F.176

Here is a summary:
US              3 years
UK              3 years
OZ              2 years
NZ              2 years
 

TAX LINKS  These links offer useful information that will often serve to confuse you more..  We've placed them here merely as a reference..  What you need to remember is that you shouldn't be double taxed, taxes paid in China should not have to be paid in your country particularly if there exists a tax treaty between the two countries.   

Tax Guide for U.S. Citizens and Resident Aliens Abroad 

Tax Briefing, PDF DOCUMENT  90 k

China Individual Tax Rates

CHINA TAX TABLE

Assistance in Filing U.S. Income Tax Returns

The following private accounting firms in Beijing may also assist taxpayers in preparing tax returns:

Multiple Sources of Income:

Lets say you are working in two or three different schools, and along with your private tutoring you bring in about 10,000 RMB..  For each source of income where less than four thousand is earned, you will likely not have to pay the tax because the issuance of your renumeration is not centralized.  

Back to Beginning

Expenses in China:

Your expenses in China will be minimal.   We have made arrangements for all our teachers to receive a free apartment, including hot water, electricity, air conditioning and heating.  Amenities such as microwave, internet, phone, Chinese Language lessons, televisions, DVD,  clothes washer are all included and embedded in the body of your contract with the school.  To apply some context to the expense / salary ratio - the salary of a first time foreign teacher is usually the same as the headmaster of the school.  Your only true expense is purchasing food and some local transportation. 

Back to Beginning

Cost of food:

Eating at western restaurants is expensive and you will pay western prices.  Coffee shops, and cafe's are becoming increasingly popular offering gourmet coffee and western snacks.  The table below reflects recent prices as of 01/07/2004.

Cost of Local Travel:

A comfortable coach style bus traveling 300 miles (one way) will cost approximately 45-50 Rmb.  ($5.50)  For those who are good at math, multiply that number times 2 and you've got a round trip fare.  Local taxi prices vary from city to city.  Below is a table for the average cost of local transportation in some areas.

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