China considers a tax on currency transactions

The central bank of China is currently considering the introduction of a new tax on currency transactions in order to neutralize speculation in the financial markets. 

The rate of the upcoming Tobin tax will be probably kept at zero for the first time, while the new rule awaits the official approval of China’s government.

However, the Tobin tax isn’t supposed to disrupt hedging as well as other Forex transactions carried out by a variety of companies. It’s still unclear when the measure would be rolled out.

Meanwhile, the central bank justifies the move by recent declines in the country’s foreign exchange reserves, to say nothing of the fact that increased capital outflows have impacted global markets.

Capital outflows from this Asian country have been driven by worries regarding its economic slowdown as well as expectations of higher American interest rates. So, it has enables the central bank to perform an intervention in the currency markets for the purpose of supporting the national currency and cracking down on speculative trading positions.   

The Yuan has already dipped 5% against the greenback since the last year’s August, while financial analysts are assured that China’s currency will sag 3.5% within the period of 12 months.

Scroll to top