China scraps interest tax on stock account balance

(Xinhua/Agencies)
Updated: 2008-10-26 16:18

BEIJING - China has scrapped the tax levied on the interest income of individual stock account balance, said the Ministry of Finance on Sunday.

The ministry said the decision, effective October 9, aimed at maintaining a stable and healthy development of the capital market.

In another move to boost domestic demand, the country had scrapped the 5 percent individual income tax on savings interest earnings starting on the same day.

The loosening in monetary policy highlighted the government's rising concern over the slowing economy and slumping capital market.

This policy change comes amid a package of measures the government is using to revive the nation's plunging stock market. The nation is restricting sales of state-owned shares by introducing exchangeable bonds and it simplified the share buyback process. China also scrapped the tax on stock purchases in September.

"This announcement is a natural extension of the policy to remove tax payments on interest income from bank deposits," Bloomberg quoted Jing Ulrich, chairwoman of China equities at JPMorgan Chase & Co. in Hong Kong, as sayingl. "We expect this to have a mildly positive effect on the market."