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China Drafts Tax on Currency Trades

Supporters hope Tobin tax would reduce yuan speculation; opposition sees FX tax as 'contrary to the spirit of a freely usable currency.'

By Enda Curran | Updated on March 15, 2016

China’s plans for a tax on currency trading triggered an outcry of criticism about the potential hit to financial markets. Obscured in the conversation is how the move shows again that the world’s No. 2 economy isn’t content with acceding to a global financial system crafted by No. 1.

No major economy has implemented a Tobin tax, a move that backers say would curb currency speculation that distorts exchange-rate values. The rules still need central government approval, and it’s not clear how quickly they can be implemented, according to people familiar with the matter. The initial levy would be kept at zero to allow authorities time to refine the rules, and it wouldn’t be designed to disrupt hedging and other foreign-exchange transactions undertaken by companies, they said. 

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