China: Imposing currency tax? - Investec

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Mar 15, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    Research Team at Investec, notes that the China’s central bank has reportedly drafted rules for a tax on foreign exchange transactions, known as a Tobin tax, that would help curb currency speculation.

    Key Quotes

    “Details suggest the Tobin tax may be set to zero to begin with as rules are refined, and that the tax is not designed to disrupt hedging and other foreign exchange transactions undertaken by companies.

    A foreign exchange tax on speculative activities would complicate plans by China to create an international reserve currency and could undermine the PBoC's pledge to increase the role of market forces in the world’s second-largest economy. The reality is that by taxing certain sectors of the currency markets, the Chinese authorities may reduce availability and depth of pricing - and in fact increase volatility in a counter-productive way.”
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