China Looks at Introducing Tax on Foreign Currency Transactions
China is looking at introducing a tax on foreign currency transactions, among other measures, to curb speculative capital flows, even though outflows have recently slowed, a senior foreign-exchange regulatory official said Tuesday.
Wang Yungui, the head of the regulation department at China’s State Administration of Foreign Exchange, said in a briefing that the regulator is studying a Tobin tax. This kind of levy aims to penalize short-term currency speculation and is named for Nobel Prize-winning economist James Tobin.
”We are considering policies to increase the costs of short-term speculation as long as they don’t affect normal capital flows,” he said.
Mr. Wang said other tools under consideration include imposing fees on sales of forward positions; The People’s Bank of China is currently testing the fees in a pilot project.
No timetable was given. In recent weeks, Mr. Wang said, capital outflows have slowed markedly.
China’s forex reserves fell by $28.57 billion from the month before to $3.202 trillion at the end of February, after a decline of $99.5 billion in January. Though February marked the fourth consecutive monthly decline, the pace was slower than in previous months, aided by tighter enforcement of capital controls and other measures from Beijing aimed at restoring confidence in the yuan.
Source: WSJ
