Updated: May 31, 2005
China was considering canceling the dividend tax paid by shareholders to liven the laggard stock market.

Unidentified sources said that the State Council met last Tuesday and decided to remove the dividend tax beginning June 1.

Officials from the central bank and the securities regulator attended the meeting.

The securities regulator would hasten its steps in carrying out favorable tax policies for investors, said Shang Fulin, chairman of the China Securities Regulatory Commission. Analysts think it signals a possibility that the dividend tax might be cancelled.

At present, shareholders are levied a 20 percent tax for any dividends received, a policy that has remained unchanged for years.

Analysts said that it would hugely benefit stockholders if the dividend tax were canceled. Investors would receive in total 10.08 billion yuan (US$1.22 billion) more dividend if the tax were canceled, according to 2003 data released by companies listed on domestic exchanges. The dividend distributed by 655 listed companies in 2003 reached 55.43 billion yuan.

The meeting also discussed the establishment of an intervention fund to stabilize the stock market. However, no decision had been made.

"Though there was no agreement, it still shows the government is striving to resolve these problems, which is the positive aspect," said a securities analyst.