China's Tobin tax proposal riles banks which flag the risk of foreign exodus

Beijing

CHINA'S proposal for a tax on currency trading is getting a cold reception in the foreign-exchange market.

Mizuho Bank Ltd says a so-called Tobin tax on yuan trades would reduce liquidity in a currency with bid-ask spreads about five times wider than the yen. A levy would set back China's push to make the yuan a reserve currency and could heighten investor concern over capital outflows, according to Commonwealth Bank of Australia. The proposal is "short-sighted" and would drive away foreign investors, Citi Private Bank said.