China mulls halting savings tax

China mulls halting savings tax

Chinese markets have been volatile this year

The Chinese government is considering suspending or reducing a 20% tax currently in place on bank savings, state media has reported.

The move to change the tax - introduced in 1999 - would be aimed at making saving in banks more attractive.

Shares have replaced banks as the most popular place to invest money - with China's stock market climbing 130% in 2006 and by more than 50% in 2007.

However, there are concerns that the stock market has become overheated.

Better returns

Strong demand from domestic investors, many of whom are using savings to buy shares, is helping to underpin gains on the stock market.

One of the main factors behind the jump in the market has been a willingness among ordinary people, such as students and pensioners, as well as investors and businesspeople, to buy shares.

Instead of leaving their savings in bank accounts, many people are now using the cash to buy shares in the hope of receiving better returns.

In May this year, Beijing opted to triple the tax on stock transactions to 0.3% to try to damp down the enthusiasm of private investors.