China moves toward cutting bank savings tax



2007-06-29 02:28:42 THE ASSOCIATED PRESS







SHANGHAI, June 29 (AP) -- China's legislature approved a bill Friday that allows the Cabinet to suspend a 20 percent interest rate tax on bank savings, a move aimed mainly at cooling the red-hot stock market.





Reducing or eliminating the tax would effectively raise the real interest rate on bank deposits, encouraging investors to keep their money in banks rather than shifting funds to the surging stock market.





The tax on earnings from bank savings was introduced in 1999 to encourage savers to spend more money.





The proposal to let the State Council, or Cabinet, decide on whether to suspend or reduce the tax was approved Friday by the Standing Committee of the National People's Congress, Xinhua said.





The move is among measures mooted in the state-controlled media as a way to prevent stock prices from surging too high.





The benchmark Shanghai Composite Index fell 2.4 percent to 3,820.70 on Friday, as investors reacted to the news.
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