Stock tax reform 'may buoy market' (2)

For individuals who hold shares for at least a year, the dividend tax will be halved to 5 percent from Jan 1. The rate will be doubled to 20 percent for those who hold shares for one month or less, the ministry said.

For investors who keep equities between a month and a year, the tax will remain unchanged at 10 percent of the dividend.

"The longer investors hold shares, the lower their tax burden is," it said in a statement.

"This will encourage long-term investment strategies and suppress short-term speculation."

Liu Xinhua, vice-chairman of the commission, said that more detailed regulations about the tax adjustment would be released soon.

He Qiang, head of the Securities and Futures Institute of the Central University of Finance and Economics, said the differentiated tax rates might help curb short-term speculation and stabilize the market, although the effects may be limited.

"The market also needs more capital to drive up large-cap shares and support growth," He added.

After China's economy suffered its most serious slowdown in a decade, with a seven-quarter straight decline in the growth rate, investors are still worried about the earnings outlook for the country's larger domestic companies, especially the State-owned ones, which have been decreasing fast.

In the first 10 months, State-owned enterprises' profits dropped 8.3 percent from a year earlier, the Ministry of Finance said on Thursday.

The gloomy economic environment may still hold back investor enthusiasm in the stock market until the first quarter of next year, putting pressure on securities regulators to introduce more stimulus measures to restore some investor interest in falling domestic equities, analysts said.