The NY Times reports:

Chinese stock markets plummeted Wednesday and continued their decline in early trading Thursday after the authorities in Beijing moved to impose higher taxes on trading activity.

And this anaysis:

“The psychological impact on investors could be larger than the actual effect of the duty adjustment,” Shen Minggao, an economist at Citigroup, wrote in a research note.

Most analysts said they did not think that a sharp drop in stock prices would harm the Chinese economy, which continues to grow robustly. Some said they expected the markets to resume their climb quickly unless the government announced further measures.

“If the market expectation is that share prices are going to rise 50 percent in the next six months, then the transaction tax is affordable,” said Dong Tao, chief Asia economist at Credit Suisse. 

To read more:

http://www.nytimes.com/2007/05/31/business/worldbusiness/31chinastox.html?_r=1&th&emc=th&oref=slogin