* Firmer yuan, higher rates to spur fund inflows -SAFE
* SAFE sees limited impact from Fed's stimulus-tapering
* China considers new tax to deter hot money flows
* FX rules for foreigners selling bad loans to be eased
(Updates with SAFE statement on FX rules)
By Kevin Yao
BEIJING, Jan 24 China's firmer yuan and higher
interest rates could attract more money inflows this year,
despite the possible impact of the Federal Reserve's stimulus
tapering, the country's foreign exchange regulator said on
The Chinese authorities are considering a "Tobin tax" on
financial transactions to deter speculative capital flows, said
Guan Tao, head of the department of international payments at
the State Administration of Foreign Exchange (SAFE).
A Tobin tax imposes a small charge on individual currency
transactions to discourage excessive speculation.
"If the renminbi (yuan) continues to be stable or rise
sightly while yuan interest rates are higher than those of major
currencies, financial operations of many companies could lead to
more money inflows," Guan told a news conference.
"This will increase our foreign exchange reserves, given
that we already have large reserves and investment returns from
the reserves," he added.
Chinese banks posted a surplus of 1.68 trillion yuan
($277.61 billion) in their foreign exchange settlements in 2013,
up 210 percent from the previous year, Guan said.
The central bank has said China's foreign exchange reserves,
the world's largest, rose $157 billion in the fourth quarter to
$3.82 trillion at end-2013.
A Reuters poll showed that the yuan is likely to
gain 1.7 percent versus the dollar in 2014 due to capital
inflows, even as the U.S. currency draws some support from the
Fed's move to unwind its economic stimulus.
Guan said the Fed's tapering on China's capital flows has so
far been limited, but he cautioned that some money could leave
emerging markets as the U.S. central bank pares its stimulus.
China's stable economic growth and large foreign exchange
reserves will provide a cushion against possible capital flight
caused by the Fed's tapering, he said.
The government has laid out plans to make the yuan
convertible on the capital account, but it will also adopt
measures to control potential risks from volatile money flows,
"We will use more market-based means to manage (capital
flows) and there are many tools that are under consideration,
including a Tobin tax," he said.
Yi Gang, a vice central bank governor who is also head of
the SAFE, wrote in an article earlier this month that China
should study the so-called "Tobin tax" on financial dealings to
curb hot money flows.
Meanwhile, the foreign exchange regulator said in a
statement on its website (www.safe.gov.cn) that it will
simplify rules on some currency transactions, including making
it easier for foreign investors to deal with non-performing
From Feb. 10, foreign investors will no longer need
approvals when they exchange profits from disposals of bad loans
in China, while approvals on currency dealings by Chinese
debt-clearing companies will also be abolished, according to the
The regulator also said that it will scrap approvals for
financing leasing firms when they generate revenue overseas and
it will ease rules to allow domestic firms to extend the
maturity on their overseas loans to more than two years.
Chinese Premier Li Keqiang has been pushing government
agencies to cut red tape and cancel unnecessary administrative
approvals as part of efforts to promote market-oriented reforms.
($1 = 6.0517 Chinese yuan)
(Additional reporting by Xiaoyi Shao; Editing by Richard