From Bloomie:
China has for the second time this month raised the possibility of taxing foreign-exchange transactions as record capital outflows from the world’s second-largest economy put pressure on the yuan.
“We are currently studying measures including Tobin Tax, unremunerated reserve requirement and handling fees for foreign-exchange trading to suppress any abnormal and significant flows of short-term funds that seek arbitrage,” Wang Xiaoyi, deputy administrator of the State Administration of Foreign Exchange, said Thursday at a press conference in Beijing. Central bank Deputy Governor Yi Gang called for such punitive measures to be introduced to deter currency speculators in China Finance magazine, a People’s Bank of China publication.
The last time SAFE said it was considering imposing a levy on yuan trading was in early 2014, when the authorities were having to stockpile dollars to prevent fund inflows from driving the yuan up too sharply. The tide of money has since turned and the nation’s foreign-exchange reserves tumbled $329 billion in the first nine months of this year, having been little changed in 2014 and jumped by a record $510 billion in 2013.
Won’t do jack to prevent capital flight but it will help slow speculative activity piling in on top of it, reducing volatility.
To be honest, the entire world needs a giant Tobin Tax.
