CRI听力：China's Stocks Rally after Tax Cut

The overnight announcement of a cut in share trading taxes has triggered a big rally on the Chinese stock market. The key Shanghai Composite Index rose more than 9 percent on Thursday, marking the largest gain since October 2001.

The policy change slashed the stamp tax from 0.3 percent to 0.1 percent. It was announced two days after the benchmark index had fallen to half its peak of October 2007.

In an interview with CRI's reporter Zheng Chenguang, Shi Lei, a senior analyst with the Beijing-based Tianxiang Investment Consulting Company, says the new move is expected to restore investors' confidence in China's gloomy stock market.

On the first day of the new tax cut, the long-anticipated measure has already given a strong boost to China's main stock market.

The Shanghai Composite Index closed 304.7 points higher, at 3,583, with just one of its 888 stocks declining. The Shenzhen Composite Index rose 8.7 percent. (wwW.hxen.net)

Shi Lei says the stamp tax reduction shows the government's willingness to stabilize the market.

"From the series of measures taken by the government recently, including today's cut in the transaction tax, we can see that the government still attaches great importance to China's equities market. Confidence in recovery from the move is even more important than a reduction in investment costs. Stock investors are now gaining confidence which was previously damaged by the prolonged dip in the market."

The new tax move comes after the country's stock market fell nearly 50 percent from its peak in mid-October. Overvaluation of shares, tight monetary policies, and concerns over the economy and corporate earnings due to a global economic slowdown all served to drag the Chinese market down in the first quarter of 2008.

Shi Lei says although the cut in the stamp tax will boost the market in a short term, the future of China's stock market is still to be determined by the performance of listed companies and the broader aspects of China's national economy.

"The country's overall economic development will set the path for the future development of China's various industries. It is also a crucial factor in deciding if a listed company can make a profit. Moreover, the overall economy as well as the country's macro-control measures, such as monetary policies and exchange policies, will also have a great influence on investors' confidence in the market. "

Earlier this year, China's State Council approved in principle draft regulations on supervision and risk-handling at securities firms to promote transparency, efficiency, and safe market operations.

The China Securities Regulatory Commission also ordered block trading for bulk sales freed from the lock-up period.