China Tobin Tax Riles Analysts as Citi Warns of Foreign Exodus
- Proposed levy seen curbing liquidity, deterring overseas funds
- Mobius among minority of supporters, eyeing boost to reserves
The currency symbol for the Chinese yuan and the dollar is displayed at a currency exchange store in Hong Kong, China, on Wednesday, Aug. 12, 2015. The yuan sank for a second day, spurring China's central bank to intervene as the biggest rout since 1994 tested the government's resolve to give market forces more sway in determining the exchange rate.
Photographer: Xaume Olleros/BloombergChina’s draft plan for a tax on currency trading is getting a cold reception in the foreign-exchange market.
Mizuho Bank Ltd. says the so-called Tobin tax on yuan transactions would reduce liquidity in a currency with bid-ask spreads already five times wider than those of the yen. A levy would set back China’s push to make the yuan a reserve currency and could heighten investor anxiety over capital outflows, according to Commonwealth Bank of Australia. The proposal is “short sighted” and would drive away foreign investors, Citi Private Bank said.