China may cut bank savings

China may scrap or lower the 20-percent tax on bank deposit savings, official media reported Wednesday, in a move seen as another effort to slow the influx of money into the booming stock market.

A draft bill outlining the plan was submitted to the standing committee of China’s parliament on Wednesday, Xinhua news agency said in a brief dispatch.

Xinhua said suspending or reducing the interest tax introduced in 1999 would help to make savings deposits more attractive, amid concerns that rising inflation means investors were basically losing money by parking it in banks.

China’s inflation rate jumped to 3.4 percent in May, topping the benchmark one-year bank deposit rate of 3.06 percent.

“After a number of voices were raised in recent weeks calling for higher returns on personal bank savings, the top legislature has now decided to look into the matter,” Xinhua said. Central bank assistant governor Yi Gang also said the low returns on bank savings was a concern.

“We will take efforts to make it (the real interest rate) generally stay positive,” he said in Wednesday’s edition of the official China Securities Journal. The poor returns on bank savings has been one of the reasons for the spectacular climb in China’s stock market as small savers have put their money into stocks in hope of a better return. afp

source:www.dailytimes.com.pk