My setup:
Cheap VPS server in Hong Kong [1] (5USD/month, 512 RAM, 2Mbit port) running the ShadowSocks server (libev version). I have upgrade the port to 20Mbits for an extra 10USD/month. The port could be upgrade to 50Mbits for 25USD/month.
For DNS I use ChinaDNS [2] to automatically filter out bad DNS results from China's censorship. It works by sending DNS queries to all multiple DNS server at the same time (give it a few local DNS servers and foreign DNS servers). The foreign DNS connections are tunneled through ShadowSocks.
ShadowSocks can work as a Socks5 proxy, tunnel or transparent proxy [3]. Socks5 is the easiest to use and can even do DNS lookups on the server. I use the transparent proxy [3] option, since it allows selecting which traffic should go over the proxy.
The socks5 option will try to proxy localhost & lan conections to the proxy server.
An optimized list of subnets can be generated using bestroutetb [4]. I load the subnets for China (can private LAN) into an ipset hash and use iptables rules to exclude those subnets from going over the proxy.
ChinaDNS [2] and bestroutetb [4] could be used for VPNs too. This could be used when trying to access different services (US, UK, etc..) that don't allow access from outside their country. Use one VPN for US and another for UK, then use bestroutetb [4] to build subnet lists for each country route traffic over the correct VPN.
2. https://github.com/shadowsocks/ChinaDNS
3. https://github.com/shadowsocks/shadowsocks-libev/blob/master...
4. https://github.com/ashi009/bestroutetb
edit: fix formatting and port prices.