China Economic News

[greengiraffe]

China fuels IMF fears for growth

• THE AUSTRALIAN
  
• SEPTEMBER 04, 2015 12:00AM
  

0

David Uren
[Image: david_uren.png]
Economics Editor
Canberra

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Retail trade. Source: TheAustralian
[b]China is emerging as one of the biggest risks to the global economy, with the International Monetary Fund calling on G20 finance leaders meeting this weekend to help avoid a new worldwide downturn by doing more to lift productivity and stimulate demand.[/b]
The fund is preparing to slash growth forecasts for the global economy, with this year shaping up as the weakest since the 2008-09 global financial crisis. The downgrade comes just two months after the fund last cut its estimates.
While “emerging” countries such as China, Brazil and Russia helped pull the world out of the crisis, their easy money and budget stimulus policies were threatening to pull the global economy down. The extent of the downgrade will be made public next month, but the IMF is expected to cut its estimate for global growth this year from 3.3 per cent to 3.1 per cent, with emerging country growth possibly dropping below 4 per cent.
In a report prepared for G20 finance ministers and central bank governors meeting in Turkey tomorrow, the fund says that if any of the risks confronting the global economy were realised­, “it would imply a much weaker outlook” than this downgrade.
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The IMF says world trade, on which the growth of these countries has relied, is now falling. They are also having to cope with lower commodity prices, high company debts and the potentia­l for disruption once the US starts raising interest rates.

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Director of the IMF Christine Lagarde.

“Global growth remains moderate, reflecting a further slowdown in emerging econo­mies and a weak recovery in advance­d economies,” the fund says. “Productivity growth in both advanced and emerging countries continues to be low.”
The fund says G20 governments and their central banks should be doing more to boost demand. Governments with the budget scope to lift spending in areas such as infrastructure should be doing so, while central banks should keep rates low.
The Abbott government’s effort­ to lift demand with tax cuts for small business appears to have produced only a short-term increase in spending. Retail figures released yesterday show sales fell 0.1 per cent in July, the first dip in spending since May last year.
Stores selling office equipment, electrical and household goods had the biggest fall. Sales of electrical goods were down 3.3 per cent and are back to pre-budget levels.
Citigroup economists Josh Williamson and Paul Brennan said: “We were never optimistic about the small-business assistance package but its half-life was even less than we expected.”
Tony Abbott said yesterday that the global economy was delivering­ mixed results. “I can understand why people are ­anxious because, plainly, we’ve seen bad news in China,’’ the Prime Minister said. “China’s growth is still strong, but it’s slower than it was. I’m pleased that growth is picking up strongly in the United States, I’m pleased that Europe seems to be finally going forward. So, there are good things as well as disturbing things happening in the world economy.”
Labor’s Treasury spokesman Chris Bowen said the government could not blame the global economy for the weakness in Australia’s economic growth. Although exports were down, so too was business investment and housing construction, while consumption was weak.
He said Joe Hockey was in a “parallel universe” asserting that the economy was “growing well”.
The IMF said implementing policy to lift actual and potential growth had “taken on an urgency” since the G20 finance ministers meeting in February because of the risk of a deeper downturn. It urged countries to do more to lift public infrastructure investment and undertake reforms to lift competition. It said budget strategies could include lowering marginal personal income taxes and company taxes, financed by cuts to unproductive spending or base-broadening measures.
Mr Abbott told 2GB interviewer Alan Jones yesterday that any increase or broadening of the GST would only make sense if the overall tax burden was lowered.
The IMF said the recovery in the advanced world was weaker than it expected while emerging economies were slowing. “World trade in volume terms contracted in the second quarter, highlighting the failure of investment to pick up as expected,” it said.
The slowdown in China was also having a broader impact on trade than had been expected.
The IMF warned advanced-country central banks against raising their interest rates, as “accommo­dative monetary policy remains essential”.

[cfa]

China’s stock-market rout that erased $5 trillion in value is close to ending, according to the nation’s central bank governor.
With the yuan’s exchange rate versus the dollar close to stabilizing and a stock-market correction almost done, China’s financial markets are expected to be more stable, governor Zhou Xiaochuan said. His comments were made in a statement on the bank’s website Saturday after a meeting by finance ministers and central bankers from the Group of 20 nations in Ankara.
The Shanghai Composite Index has tumbled 39 percent since June 12, when the gauge reached its highest level in more than seven years as mainland investors borrowed record amounts of funds to buy equities. China’s shock devaluation of the yuan in August rattled world markets and sparked exchange-rate declines in emerging economies.

[CityFarmer]

Mr. Mobius view on the China stock market...

Mobius to Beijing: Quit fighting the market and let stocks fall

BEIJING (SEPT 7): How do you get a bottom-up stock picker, a chart watcher and an economist to agree? Try asking them about Chinese equities.

Mark Mobius, Tom DeMark and George Magnus - world-renowned forecasters who view markets through three very different lenses - are all finding common ground with their predictions that Chinese shares have further to drop. They say government efforts to prop up the US$5.1 trillion ($2.14 trillion) market are futile, a view that's gaining traction among analysts after an unprecedented two-month rescue effort failed to spark a sustained rally.
...
http://www.theedgemarkets.com/sg/article...tocks-fall

[CityFarmer]

A view from a prominent person, on China stock market...

‘Dr Doom’ dismisses market panic over China

Cernobbio (Italy) — Professor Nouriel Roubini has cast aside his mantle as the lugubrious “Dr Doom” of the global economy, scathingly dismissing market panic over China as led by ill-informed investors.

“China is not in free-fall,” the professor at New York University told the Ambrosetti Forum of world leaders on Lake Como. He described the alarmist reaction to the Shanghai stock market rout as “excessive, unreasonable, and irrational”.
...
http://www.todayonline.com/business/dr-d...over-china

[Art or Science]

China forex reserves in record fall as Beijing tries to calm markets

SHANGHAI/BEIJING: China's foreign exchange reserves posted their biggest monthly fall on record in August, reflecting Beijing's attempts to halt a slide in the yuan and stabilize financial markets following its surprise move to devalue the currency last month.
China's reserves, the world's largest, fell by US$93.9 billion last month to US$3.557 trillion, central bank data showed on Monday (Sep 7).
The drop left market watchers questioning how sustainable China's efforts to support the yuan are, as capital flows out of the country due to fears of an economic slowdown and prospects of rising US interest rates.
"Frequent intervention will burn foreign reserves rapidly and tighten the onshore market liquidity," said Zhou Hao, senior economist at Commerzbank in Singapore.
The offshore yuan weakened following the data release to trade at a record discount to the onshore rate, suggesting investors believe the official rate is being kept too high.
There was relief, though, that the dip in reserves had not been larger, with some commentators predicting in the run-up to the announcement that the drop could be as much as US$200 billion.
Still, economists estimated that the fall was probably slightly above the US$94 billion figure, given the positive impact of valuation changes as the dollar fell against major currencies. A large portion of China's reserves are held in US Treasuries.
The decline in reserves has quickened following China's near 2 per cent devaluation of the yuan on Aug 11, which stoked fresh concerns about the economy and heavy selling of the currency.
China was so surprised by the reaction to the devaluation that it is likely to keep the yuan on a tight leash in the near-term to head off fears of a global currency war, policy insiders have told Reuters.
MARKETS STILL NERVOUS
Chinese policymakers are now determined to show their financial markets are back to normal, after the devaluation of the yuan, or renminbi, coupled with wild swings in its stock markets caused jitters in markets around the world.
China's Central Bank Governor Zhou Xiaochuan told financial leaders from the world's 20 biggest economies over the weekend that Chinese financial markets had almost completed their correction after a steep run up in stock prices in the first half of the year.
"Currently, the renminbi to dollar exchange rate already tends toward stability, the stock market adjustment is already roughly in place and financial markets can be expected to be more stable," Zhou told G20 finance ministers in Turkey, according to a statement from the central bank.
Zhou's comments, coupled with pledges from regulators to deepen financial market reforms, had limited impact in stabilizing China's stock markets on Monday, which closed before the release of the reserves data.
The CSI300 index of the biggest stocks in Shanghai and Shenzhen closed down 3.4 per cent, while the Shanghai Composite Index was 2.5 per cent lower, in the first day of trading following a four-day long weekend.
Chinese equity markets have fallen 40 per cent since mid-June, despite the authorities unleashing a volley of policy responses to try and stem the falls.
China's stocks regulator said late on Sunday that it would take more steps to ensure stable markets.
"The government won't normally intervene, but when there are severe, abnormal fluctuations in the markets, the government can't just sit on the sidelines and must take decisive and timely measures," the China Securities Regulatory Commission said.
It added it would consider launching a circuit breaker system for the country's stock indexes, to halt trading if there are particularly wild price moves.
Last week the China-based investment community was put on edge following media reports that the China chairwoman of Man Group Plc, Li Yifei, had been taken into custody to help with a police probe into stock market volatility.
However, Li told Reuters on Monday that the reports were incorrect, saying she spent last week in industry meetings and then took a 5-6 day trip to meditate.
ECONOMIC WORRIES
China's government is also pushing on with attempts to ease concerns about the country's slowing economic growth.
Finance Minister Lou Jiwei was quoted in a central bank statement as saying that central government spending would rise by 10 per cent this year, up from the 7 per cent growth budgeted at the start of 2015.
A string of soft economic data has made it harder for Chinese regulators to bring stability back to their markets, as fears grow of a hard landing for the world's second-biggest economy.
Earlier on Monday, China revised down its reading for growth in 2014, saying the economy expanded by 7.3 per cent, a notch below the previous estimate of 7.4 per cent.
This year the economy is headed for its slowest expansion in 25 years, and concerns have been building that it may miss the official growth forecast of around 7 per cent.
However, analysts say increased government spending, combined with five interest rate cuts since last November, mean that risk has diminished.
"We remain of the view that the considerable monetary, fiscal and macro prudential policy stimulus already in place and expected will put full-year growth in the 'about 7 per cent' range," said Tim Condon, head of research for Asia at ING Bank in Singapore.
China's top economic planning agency tried to back up that view, saying on Monday that the country's power usage, rail freight and property market have all shown improvements since August, indicating the economy is stabilizing.
"The economy is expected to maintain steady growth and we are able to achieve annual economic growth target," the NDRC said.
(Additional reporting by Pete Sweeney, Samuel Shen, and Lu Jianxin in Shanghai; Writing by Rachel Armstrong; Editing by Neil Fullick and Mike Collett-White)

- Reuters

[greengiraffe]

• OPINION
   
  
  
•  Sep 2 2015 at 8:33 AM 
   
  
  
•  Updated Sep 2 2015 at 3:10 PM 
  

Beijing tightens controls on capital flight, in hit to Australian property

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NaN of

[img=620x0]http://www.afr.com/content/dam/images/g/i/x/0/u/z/image.related.afrArticleLead.620x350.gjd182.png/1441170633340.jpg[/img]People's Bank of China governor Zhou Xiaochuan has announced changes that will make it more expensive for investors to hedge against further drops in the Chinese yuan against the US dollar. Bloomberg
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by Karen Maley
Australia's bubbly property market is likely to lose some of its heat after Beijing's latest move to clamp down on capital outflows from the world's second-largest economy.
On Tuesday, the People's Bank of China, announced changes that will make it more expensive for investors to hedge against further drops in the Chinese yuan against the US dollar.
At the same time, China's largest banks are stepping up their checks on large foreign-exchange conversions by corporate clients, while China's financial regulators are targeting illegal money-transfer agents who help wealthy Chinese transfer funds out of the country.
The pressure on Beijing to stem capital outflows has intensified in the wake of Beijing's surprise move three weeks ago to devalue the yuan.

The prospect of further falls in the value of the yuan only encourages wealthy Chinese investors to send more of their savings offshore, which further exacerbates the downward pressure on the Chinese currency.
Already-affluent Chinese investors, worried by the oversupply problems in the Chinese property market, the country's volatile sharemarket and Beijing's crackdown on corruption, have been sending large amounts of money offshore.
As a result, China's foreign exchange reserves have fallen to an estimated $US3.5 trillion ($5 trillion) from last year's peak of about $US4 trillion. And analysts believe the pace of capital outflows has increased after the devaluation of the yuan last month, which may have alone spurred the exit of as much as $US200 billion.
But heavy capital outflows put downward pressure on the yuan, and Beijing is clearly determined to stop the currency from falling too sharply. To stop this from happening, the Chinese authorities have been intervening heavily in foreign currency markets to prop up the yuan.


EASIER TO RESTRICT CAPITAL OUTFLOWS
There was always a risk, however, that Beijing would eventually decide that instead of running down foreign currency reserves to support the yuan, it would be easier to severely restrict capital outflows.
Because China doesn't have a completely open capital account, Chinese investors need Beijing's blessing to move funds offshore. Individuals are not allowed to move more than $US50,000 a year out of the country, whereas Chinese companies can move money offshore either to pay for imports or for approved foreign investments.
Investors, however, have been able to find a way around these regulations, either by getting friends or relatives to remit foreign currencies abroad or by inventing fake invoices that allow them to send more money offshore.

These are the practices that Beijing wants to stop. China's foreign exchange regulator has now sent a list of people with a track record of trying to evade the rules to the country's banks, and is threatening to punish and fine banks that turn a blind eye to such transactions.
And Chinese officials are cracking down on underground banks that help Chinese nationals to shift money out of the country.
Of course, there is always a question mark over how strenuously Beijing will crack down on illegal money transfers. After all, late last month China's official Xinhua News Agency reported vice-Public Security Minister Meng Qingfeng, who is also involved in the probe into "malicious" short selling in Chinese share markets, as saying money-transfer agents remained "rampant" even though there had been repeated crackdowns on them.
But if Beijing is serious about tightening up on capital outflows – and there are good reasons why it should take this matter seriously – then this will severely curtail the amount of money that wealthy Chinese are able to pour into property investments in Sydney and Melbourne.

[greengiraffe]

September 1, 2015 7:14 pm
China risks an economic discontinuity
[Image: 61ce75c8-0950-11e1-8e86-00144feabdc0.img]Martin Wolf

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Many believe the economy is already growing far more slowly than the government admits
[Image: 7dd6b2c8-5440-43cb-838c-e36417e7ce57.img]©James Ferguson
David Daokui Li, an influential Chinese economist, has argued that: “The stock market sell-off is not the problem . . . the problem — not a huge one, but a problem nonetheless — is the Chinese economy itself.” I agree with both points, with one exception.* The problem may prove huge.
Market turmoil is not irrelevant. It matters that Beijing has spent $200bn on a failed attempt to prop up the stock market and that foreign exchange reserves fell by $315bn in the year to July 2015. It matters, too, that a search for scapegoats is in train. These are indicators of capital flight and policymaker panic. They tell us about confidence — or the lack of it.
Nevertheless, economic performance is ultimately decisive. The important economic fact about China is its past achievements. Gross domestic product (at purchasing power parity) has risen from 3 per cent of US levels to some 25 per cent (see chart). GDP is an imperfect measure of the standard of living. But this transformation is no statistical artefact. It is visible on the ground.
The only “large”(bigger than city state) economies, without valuable natural resources, to achieve something like this since the second world war are Japan, Taiwan, South Korea and Vietnam. Yet, relative to US levels, China’s GDP per head is where South Korea’s was in the mid-1980s. South Korea’s real GDP per head has since nearly quadrupled in real terms, to reach almost 70 per cent of US levels. If China became as rich as Korea, its economy would be bigger than those of the US and Europe combined.
This is a case for long-run optimism. Against it is thecaveat that “past performance is no guarantee of future performance”. Growth rates usually revert to the global mean. If China continued fast catch-up growth over the next generation it would be an extreme outlier .
In emerging economies growth tends to be marked by “discontinuities”. But what Chinese policymakers call the “new normal” is not itself such a discontinuity. They believe they have overseen a smooth slowdown from annual growth of 10 per cent to still-fast growth of 7 per cent. Is a far bigger slowdown possible? More important, would this be a temporary interruption, as in South Korea in the late 1990s crisis — or more permanent, as in Brazil in the 1980s or Japan in the 1990s?
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There are at least three reasons why China’s growth might suffer a discontinuity: the current pattern is unsustainable; the debt overhang is large; and dealing with these challenges creates the risks of a sharp collapse in demand.
The most important fact about China’s current pattern of growth is its dependence on investment as a source of supply and demand (see charts). Since 2011 additional capital has been the sole source of extra output, with the contribution of growth of “total factor productivity” (measuring the change in output per unit of inputs) near zero. Moreover, the incremental capital output ratio, a measure of the contribution of investment to growth, has soared as returns on investment have tumbled.
The International Monetary Fund argues: “Without reforms, growth would gradually fall to around 5 per cent with steeply increasing debt.” But such a path would be unsustainable, not least because debts are already at such a high level. Thus “total social financing” — a broad credit measure — jumped from 120 per cent of GDP in 2008 to 193 per cent in 2014. The government can manage this overhang. But it must not let the build-up restart. The credit-dependent part of investment has to shrink.
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The debt overhang is not the only reason why investment will wilt. Daniel Gros of the Brussels-based Centre for European Policy Studies shows that the ratio of capital to output in China is on an explosive path. Remarkably, it is already far higher than in the US. If the capital-output ratio is merely to stabilise at current levels, and the economy is to grow at about 6 per cent, the investment share in GDP needs to fall by about 10 per cent. If that were to happen suddenly, the impact on demand would cause a slump. An investment share of 35 per cent of GDP (merely back to where it was in the early 2000s) would be a desirable outcome of reforms. But moving there swiftly would take a huge bite out of today’s domestic demand.
[Image: 57302c0a-50c9-11e5-8642-453585f2cfcd.img]
Many believe the economy is already growing far more slowly than the government admits. But the weaker the prospective rate of growth and the more uncertain are returns, the more rational it becomes to postpone investment, further slowing the growth of the economy.
The core argument for a discontinuity is that it is hard to move smoothly from an unsustainable path. The risk is that the economy slows much faster than almost anybody now expects. The government needs to work out a way of responding that does not increase global or domestic disequilibria. The best approach would be to continue with reforms, while trying to put more spending power into the hands of consumers and investing more in public consumption and environmental improvements. Such a response would be fully in keeping with China’s needs.
[Image: 56709336-50c9-11e5-8642-453585f2cfcd.img]
A discontinuity in China’s economic growth is now more likely than for decades; such a discontinuity might not be brief; and the challenge facing policymakers is huge. They need to re-engineer a slowing economy without crashing.
Moreover, the challenge is not only, or even mainly, technical. A big question is whether a market-driven economy is compatible with the growing concentration of political power. The next stage for China’s economy is a conundrum. Its resolution will shape the world.
*This story has been amended to correct the spelling of Mr Li’s surname.
martin.wolf@ft.com

[greengiraffe]

• OPINION
   
  
  
•  Aug 27 2015 at 12:00 AM 
   
  
  
•  Updated Aug 27 2015 at 12:00 AM 
  

Market meltdown: Beyond market chaos, China is reshaping economy

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Market meltdown Fears of an outright recession in China are vastly overblown. But China's leaders still have to manage a huge reform agenda.

NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/j/8/6/d/p/image.related.afrArticleLead.620x350.gj82yu.png/1440573416896.jpg[/img]Under President Xi Jinping's leadership, there is no lack of political will in today's China. Getty Images
by Stephen S. Roach
There are many moving parts in China's daunting transition to what its leaders call a moderately well-off society, but most Western commentators continue to over-simplify this debate, framing it in terms of the proverbial China hard-landing scenarios that have been off the mark for 20 years. In the wake of this winter's  sharemarket plunge and surprising devaluation of the renminbi, the same thing is happening again. I suspect, however, that fears of an outright recession in China are vastly overblown.
While the debate about China's near-term outlook should hardly be trivialised, the far bigger story is its economy's solid progress on the road to rebalancing – namely, a structural shift away from manufacturing and construction activity toward services. In 2014, the services share of Chinese GDP hit 48.2 per cent, well in excess of the combined 42.6 per ent share of manufacturing and construction. And the gap is continuing to widen – services activity grew 8.4 per cent year on year in the first half of 2015, far outstripping the 6.1 per cent growth in manufacturing and construction.
Services are in many respects the infrastructure of a consumer society – in China's case, providing the basic utilities, communications, retail outlets, health care, and finance that its emerging middle class is increasingly demanding. They are also labor-intensive: in China, services require about 30 per cent more jobs per unit of output than do capital-intensive manufacturing and construction.
Largely for that reason, China's employment trends have held up much better than might be expected in the face of an economic slowdown. Urban job growth averaged slightly more than 13 million in 2013-14 – well above the 10 million targeted by the government. Moreover, the data from early 2015 suggest that urban hiring remains near the impressive pace of recent years – hardly the labor-market stress normally associated with economic hard landings or recessions.

EFFECTIVE INGREDIENT
Services are also the ingredient that makes China's urbanisation strategy so effective. Today, approximately 55 per cent of China's population lives in cities, compared to less than 20 per cent in 1978. And the share should rise to 65-70 per cent over the next 15 years. New and expanding cities sustain growth through services-based employment, which in turn boosts consumer purchasing power by trebling per capita income relative to that earned in the countryside.
So, despite all the handwringing over a Chinese crash, the rapid shift toward a services-based economy is tempering downside pressures in the old manufacturing-based economy. The International Monetary Fund stressed the same conclusion in its recent Article IV consultation with China, noting that labor income is now expanding as a share of GDP, and that consumption contributed slightly more than investment to GDP growth in 2014. That may seem like marginal progress, but it is actually quite rapid relative to the normally glacial pace of structural change – a process that began in China only in 2011 with the enactment of the 12th Five-Year Plan.
Alas, there is an important catch. While progress on economic rebalancing is encouraging, China has put far more on its plate: simultaneous plans to modernise the financial system, reform the currency, and address excesses in equity, debt, and property markets. Meanwhile, the authorities are also pursuing an aggressive anti-corruption campaign, a more muscular foreign policy, and a nationalistic revival couched in terms of the "China Dream".


The interplay among these multiple objectives may prove especially daunting. For example, the confluence of deleveraging and the bursting of the equity bubble could create a self-reinforcing downward spiral in the old manufacturing economy that shakes consumer confidence and offsets the emerging dynamism of the new services economy. Similarly, military adventures in the South China Sea could damage China's links to the rest of the world long before it is able to count on domestic demand for economic growth.
Ironically, China's juggling act may prove even more difficult for the authorities to pull off in a market-based, consumer-oriented system. Caught in the transition from China's tightly controlled, state-directed model, the government seems to be waffling – for example, by stressing a decisive shift to markets, only to intervene aggressively when equity prices plummet. Likewise, it is embracing more of a market-based foreign-exchange regime while guiding the renminbi lower.
ADD IN STOP-START COMMITMENT
Add to that a stop-start commitment to reform of state-owned enterprises and China could inadvertently find itself mired in something comparable to what Minxin Pei has long called a "trapped transition", in which the economic-reform strategy is stymied by the lack of political will in a one-party state.

Under President Xi Jinping's leadership, there is no lack of political will in today's China. The challenge is to prioritise that will in a way that keeps China on the course of reform and rebalancing. Any backtracking on these fronts would lead China into the type of trap that Pei has long feared is inevitable.
Economic development has always been a daunting challenge. As warnings about the "middle-income trap" underscore, history is littered with more failures than successes in pushing beyond the per capita income threshold that China has attained. The last thing China needs is to try to balance too much on the head of a pin. Its leaders need to simplify and clarify an agenda that risks becoming too complex to manage.
Stephen S. Roach is a former chairman of Morgan Stanley Asia and the firm's chief economist. He is the author of the new book Unbalanced: The Codependency of America and China.



AFR Contributor

[CityFarmer]

This is another driver, on top of domestic consumption...

One Belt, One Road pays dividends overseas

XUZHOU — Two years after China first unveiled a sweeping plan to rebuild Silk Road trade links with Europe and Asia, machinery maker XCMG Group has opened a factory in Uzbekistan, sent 300 staff abroad and set ambitious goals to grow overseas.

XCMG’s foreign venture piggybacks on the bold Chinese scheme to extend the country’s global influence through financing infrastructure projects in 65 nations that are home to two-thirds of humanity, and at the same time win new markets for companies weighed down by profit-crushing overcapacity at home.

“This is China’s grand strategy,” said Mr Hanson Liu, assistant president at Xuzhou Construction Machinery Group, which aims to grow overseas income from 15 per cent of total revenue in 2014 to more than 30 per cent in the next five years.

“It’s like how a person in a village has gotten rich and wants to fix roads, build power points (and) street lamps for the neighbourhood.”

Stretching from Hungary through to Indonesia, Beijing estimates that its much-hyped One Belt, One Road initiative will add another US$2.5 trillion (S$3.57 trillion) to China’s trade in the next decade, more than the value of its exports in 2013 — when it was the world’s top exporter.
...
http://www.todayonline.com/chinaindia/ch...s-overseas

[CityFarmer]

The move make much more sense...

China to cut dividend taxes for long-term shareholders
08 Sep 2015 07:25
[HONG KONG] China said on Monday it would remove personal income tax on dividends for shareholders who hold stocks for more than a year, in a move aimed at encouraging longer-term investment in equities as opposed to short-term speculation.

The government also said it would halve the tax on dividends for those holding shares between a month and a year and that the changes would come into effect on Tuesday.

Full tax payment will be required for shareholders who hold shares for less than a month, the finance ministry said in a statement on its website.
...
REUTERS

Source: Business Times Breaking News