The new capital gains tax rules for China will mean higher taxes on investors who hold long-term debt in the country, including bonds, said James Dyson, a global head of risk analysis at Barclays Capital.
“The new rules will reduce the returns that investors can earn and the gains that investors are able to make,” Mr Dyson said.
However, he cautioned investors against making any major investments in China as a result of the new rules, saying there could be a significant upside to their return.
“It’s probably not as bad as the stock market but it’s not a great outcome, it’s a much bigger upside than the stock markets,” he said.’
Not a good outcome’ Dyson said investors should focus on the longer term rather than the short term in the short run.
“If you buy into long-lived companies, if you’re going to be a long-time investor, it probably doesn’t make sense to buy them now,” he added.
“There are lots of other companies out there that are also doing really well that you could do well with, but you have to take a long view.”
Investors should be cautious with any potential gains, he said, and should look to the long-run rather than short-term.
“The biggest thing you can do is to invest in companies that are doing really really well, so you don’t put your money into a company that’s just going to fall apart and then it will just continue to fall,” he warned.’
We should look at long-range plans’China’s new rules come amid growing concerns that the country is being overtaken by the rapidly growing US market, and as the country’s growth slows, its economy has become more vulnerable to the risks of a currency war.
The new capital gain tax rules will affect bond marketsThe new rule comes after the US imposed new restrictions on overseas profits from foreign companies last month and the new capital losses rules will also apply to foreign equity funds.
The Chinese government said the new tax rules would apply to companies with assets in the mainland and foreign affiliates, including companies owned by people with a residence in the Chinese mainland.
“All businesses in China are subject to the new regulations, and all Chinese companies are subject only to the existing rules, so all existing foreign companies will also be subject to this new regulation,” the China Securities Regulatory Commission said in a statement.
“These rules are in accordance with China’s national interests, including safeguarding the country and the people’s safety.”