Banking & Finance

Packet money

As the gifts get bigger, is a Rmb500 banknote on the way?

Packet money

The Chinese practice of handing over red envelopes to friends and relatives has ancient origins.

Commonly known as hongbao in Mandarin, or laisee in Cantonese, the cash-filled envelopes started out as coins connected together by a red string, which was believed to protect the elderly from ghosts.

Although the red envelopes came into the equation when paper money was invented, some still refer to the packets as yasui qian – which carries the connotations of protection from evil spirits.

But this Lunar New Year these gift offerings became a source of nationwide debate. There are widespread complaints that the amount of money being handed over at family events such as weddings and during Chinese New Year is growing too rapidly.

“Hongbao inflation is too fast,” complained one netizen cited in a Xinhua article.

Market research firm TNS said that people in China put aside an average Rmb3,668 ($589) for their Chinese New Year hongbao’s. To put this into perspective, the average working wage in Beijing in 2011, the city where pay is the highest, was Rmb4,672 a month.

Another netizen quoted by state media grumbled Rmb500 is the minimum amount for the children of relatives: “The tradition of giving red packets will use all my bonus in a week.”

Some parts of China are more generous than others. In southern parts of China, such as Hong Kong and Guangdong, hongbao are typically small gifts using low denomination notes.

“I’m always amazed to see how generous people are when giving red packets here. The amount is sometimes 50 times what we are used to giving,” Hong Kong resident Mark Yip told the Shanghai Daily while visiting relatives in Shanghai.

“I wonder if they really earn that much each month.”

There are fears that fatter envelopes draw attention away from the spirit behind the giving – especially for the young recipients who have grown up in a more materialistic environment.

“A lot of people link the depth of the affection with a hongbao’s thickness,” is how Xinhua sums up the problem.

The thickness of a hongbao also has a pragmatic element too. The largest banknote in China remains the Rmb100 denomination, which makes giving large sums of money inconvenient, even extravagant in appearance – a Rmb10,000 gift requires an indiscrete wad a couple of inches thick.

This relates to an ongoing debate in China over whether the country should have larger denomination notes – such as Rmb500, or even Rmb1,000.

Last year, Zong Licheng floated the idea of bigger bank notes at the National People’s Congress. It’s a longstanding issue for him, having first suggested it at the parliament in 2004.

He argued that the larger bills would save paper, be more portable, as well as reduce the circulation time of money in the economy.

The idea has met opposition both within the government and among netizens. One concern is that larger bills could be convenient for the wrong reasons, by making it easier for corrupt payments to be made.

Some seem to believe that printing more money could lead to inflation (though they ignore the fact that government could simply remove small denomination notes as it introduces the largest bills).

But when it comes to hongbao, the presence of larger notes would probably make the gift-giving easier, and it might even promote the acceleration of red envelope inflation. But the end result for the participants will probably be the same.

The experience of Shanghai professional Daniel Tao highlights how redundant the whole exercise is.

He told the Shanghai Daily that his two year old daughter received more than Rmb10,000 over Chinese New Year.

“But we also have to give a lot out in return,” he said. “It’s almost a meaningless exchange.”

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