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There’s a Big Cash Economy in …. China.

China: In Cash We Trust (WSJ): We think of India as using a lot of cash, but in reality, China’s just as big, or bigger:

Lugging nearly $130,000 in cash into a dealership might sound bizarre, but it’s not exactly uncommon in China, where hotel bills, jewelry purchases and even the lecture fees for visiting scholars are routinely settled with thick wads of renminbi, China’s currency.

This is a country, after all, where home buyers make down payments with trunks filled with cash. And big-city law firms have been known to hire armored cars to deliver the cash needed to pay monthly salaries.

This of course might not be possible in India, where buying a car needs a cheque or draft, or you have to give your PAN number (which reveals who you are).

China has a limited note printing policy, it seems:

Doing business in China takes a lot of cash because Chinese authorities refuse to print any bill larger than the 100-renminbi note. That’s equivalent to $16. Since 1988, the 100-renminbi note, graced by Mao Zedong’s visage, has been the largest note in circulation, even though the economy has grown fiftyfold.

India doesn’t have anything larger than the 1,000 rupee note either, and that is worth about $18.

Recently some political parties have decried the use of the Indian Rs. 500 and Rs. 1000 notes, saying they fuel corruption. In China, where they don’t use large bills, people use more bills instead

  • Ashish says:

    I am support of the theory that reducing denomination of largest currency notes will reduce corruption to some extent. Is there any evidence to that effect in China?

  • Shashi says:

    An organization named Arthakranti Foundation is proposing and promoting a very different financial system for the country which can be seen here: http://arthakranti.org/proposal. One of its important tenet consists of restricting value of largest note, thus making cash transactions difficult.
    The info requested by Ashish is comment above would be very interesting from that perspective.

  • Balaji says:

    “where buying a car needs a cheque or draft, or you have to give your PAN number (which reveals who you are).”…..this is what I thought too till a friend bought an i10 in an all-cash transaction without PAN – He wasn’t asked for it at all.

  • Kaushik says:

    I bought car(AStar) with cheque and Maruti Dealer didnt ask PAN#. It was 2010 though.