Tax and fee relief, removal of loan obstacles for private firms foreseen
Chinese stocks surged on Monday as investor confidence rebounded due to the expectation of further measures from authorities to stabilize the market, officials and researchers said.
China's three major stock market indexes rose on Monday. The Shanghai Composite Index increased by 4.09 percent to close at 2654.88 points. The Shenzhen Component Index surged 4.89 percent to close at 7748.82 points, and the ChiNext Index, China's Nasdaq-style board of growth enterprises, gained 5.2 percent to close at 1314.94 points.
The expectations are that China will continue to devise a series of policies and measures to increase market confidence, said Ma Jun, a member of the monetary policy committee at the People's Bank of China, the central bank.
"Tax relief and fee reductions will hopefully account for 1 percent or even more of China's GDP next year. The effect of tax cuts may be stronger than that of the United States," said Ma, who is also director of the Center for Finance and Development at the Tsinghua National Institute of Financial Research.
"Regulatory authorities are expected to clarify that bank clerks will not be held responsible for loan defaults once they do their due diligence, so that banks are not allowed to use the regulatory requirement as an excuse to discriminate against private companies when banks make decisions on the granting of loans," he said.
The government will launch guarantee funds to support private companies and increase banks' willingness to offer loans to private companies, Ma said. Money supply to capital markets would improve in the short term, as sources of capital such as wealth management funds of commercial banks and insurance companies enter the market. Some local governments have also started to provide liquidity support to listed companies, and this will help ease the capital pressure they face, he said.
Wen Bin, chief researcher at China Minsheng Banking Corp, said, "Affected by international financial market fluctuations and market expectations, the recent stock market slump was irrational and deviated from Chinese economic fundamentals, so the government took a number of measures to stabilize the capital markets.
"Aside from making efforts to stabilize capital markets in the short term, the government should also highlight institutional construction of capital markets in the long run and speed up the launch of crucial systems so that the capital markets play a proper role in supplying financing and giving support to the real economy."
Hong Rong, founder of investor education platform Hongda Education and an MBA tutor at the Shanghai Advanced Institute of Finance, also stressed the importance of strengthening institutional construction.
"Lack of long-term investment, or the prevalence of short-term speculative trading, is the biggest problem hindering the healthy development of the A-share market. … It is of great significance to bring in more long-term institutional investment of all kinds, especially corporate annuity funds — funds contributed by enterprises and employees to supplement employees' retirement benefits," Hong said.
Introduction of long-term capital partly relies on securities firms' abilities, as they are core market intermediaries directly interacting with listed companies and investors, he said.
He strongly recommended boosting the development of Chinese securities firms by granting them tax breaks, low-interest loans and the right to manage clients' security deposits.
Market rules that increase transaction costs should also be eliminated, such as the rule setting a 10 percent daily limit on stock price fluctuations, which has underpinned speculation on the A-share market, he said.
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