China cancels stamp tax on stock purchase to support equities market

China cancels stamp tax on stock purchase to support equities market

BEIJING, Sept. 18 -- China decided on Thursday to scrap the stamp tax on stock purchase, effective on Friday, in a move to boost the equities market after domestic stocks fell for third consecutive day since Tuesday.

With the authorization of the State Council, China's Cabinet, the Ministry of Finance and the State Administration of Taxation said they decided to cancel the share trading stamp tax on stock purchase while the stamp tax on share selling remained unchanged at 0.1 percent.

The cancellation came hours after Chinese stocks tumbled 1.72 percent on Thursday, amid the current global financial turmoil.

It was the first time since 1991 authorities had levied an unilateral stamp tax on stocks trading and the second time this year they had adjusted the stock trading stamp tax.

On April 24, it cut the tax from 0.3 percent to 0.1 percent amid falling share prices.

Central Huijin Investment Co., Ltd., an investment arm of the government, said on Thursday it would buy shares of three major Chinese lenders on the secondary market to fortify their share prices amid the stock market slump.

The company said it would buy the shares of Industrial and Commercial Bank of China (ICBC), the Bank of China and the China Construction Bank (CCB) and the operation had started on Thursday.

The move was to ensure the government's interest in the three lenders, support the steady operation of major state-owned financial institutions and stabilize their share prices.

"The decision was important for a stable operation of the capital market," said a China Securities Regulatory Commission (CSRC) spokesman.

Central Huijin was set up in 2002 with a mission to reform state-owned banks burdened with a high ratio of non-performing loans.

The CSRC spokesman said promoting a steady and healthy development of the country's capital market had been a strategic decision of the government. The CSRC would keep a close watch over the impact of overseas market turmoil on the domestic market.

"So far, the Chinese economy has maintained good momentum. The country's capital market was built on a solid economic foundation and enjoyed a stable institutional environment."

He said as the next move, the securities regulator would step up building fundamental market systems, improve market supervision and enforce the market's internal level-off mechanism to promote the sound development of the capital market.

"The sluggish stock market has influenced the real economy's growth. Stocks of some listed companies had been undervalued. The stamp tax cut was aimed to restore their stock value to a reasonable level," said Bai Jingming, a Ministry of Finance researcher.

The authorities had adjusted the monetary policies in preparation of the stamp tax abolishment. On Monday, the country became the first to cut its interest rates as markets across the world reacted to the crisis on the Wall Street.

The central bank cut rates by 0.27 percentage points to 7.2 percent. It also cut the reserve requirement ratio for all but the country's five largest banks by 1 percentage point to 16.5 percent.

Following the first rate cut since 2004, banks plummeted on domestic bourses. ICBC and CCB both dropped by the daily limit of 10 percent on Tuesday and Wednesday.

"The banking sector's fundamentals are good. The Central Huijin's move showed the government's keen concern over tumbling bank shares and its strong support for the three banks," said Li Li, a China Chengxin senior analyst.

Guo Tianyong, a China University of Finance and Economics researcher, said the unilateral stamp tax would reduce the trading cost of purchasers and the tax cut showed the authorities had recognized some shares shrank too sharply.

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China supports strategic SOEs to buy more stocks of listed subsidiaries

China is to back up its 147 centrally-administered state-owned enterprises (SOEs) in buying more stocks of their listed subsidiaries, the top state assets regulator said here Thursday.

Li Rongrong, the State-owned Assets Supervision and Administration Commission (SASAC) director, said the regulatory body had long held SOEs, particularly the 147 which report to the central government, should be an active force in facilitating a stable development of the stock market.

Companies mainly owned by the 147 giants should play a exemplary role on the market, he added.

Li stressed the Chinese economy was basically sound, and the 147 conglomerates were performing well. The SASAC supported them to buy more stocks of their listed companies based on their own growth requirements.

Chinese stocks have continued to hit new lows amid worries about global financial turmoil and the slowdown of the domestic economy. On Thursday, Chinese stocks tumbled 1.72 percent, the third fall in three days.

State investment arm to shore up three Chinese lenders' shares with stock-buying plan

The Central Huijin Investment Co.,Ltd., an investment arm of the Chinese government, said Thursday it would buy the shares of three major Chinese lenders on the secondary market to shore up their share prices amid stock market slumps.

The company said it would buy the shares of the Industrial and Commercial Bank of China, the Bank of China and the China Construction Bank and operations had started on Thursday.

Central Huijin was set up in 2002 with a mission to reform state-owned banks burdened with a high ratio of non-performing loans.