KEY POINTS:
SHANGHAI - The Chinese government is not planning to tax stock gains, the Shanghai Securities News reported today, after rumours about such a tax drove domestic shares down 8.8 per cent last night.
The China slide upset investment markets worldwide.
Officials at China's Finance Ministry and tax authorities denied the rumours, saying the government was not planning to levy such a capital gain tax, the official newspaper said in a front-page report.
China stopped taxing gains from stock trade in 1994 to promote the development of its stock market, the newspaperta in the past two months. The central bank raised bank reserve requirements on Sunday.
Many traders attributed the plunge mainly to hectic speculation. Ahead of next week's meeting of the National People's Congress in Beijing, investors had bid up stocks on hopes that the congress would produce market-friendly policies, including corporate tax reform and steps to boost rural incomes.
In an apparent bid to soothe investors, a front-page article in the official China Securities Journal, one of three major domestic securities newspapers, said Tuesday's falls were unlikely to reverse the bullish trend of the stock market.
Citing analysts, the article said the losses on Tuesday were driven by various rumours, from interest rate hikes to a planned crackdown on illicit fund flow into the stock market. It did not mention the capital gain tax rumour.
China's central bank governor Zhou Xiaochuan was quoted in state media on Wednesday as saying that China was still fighting excess liquidity in its banking system, but the link between stock prices and the liquidity problem was not strong. The reports did not elaborate.
- REUTERS
