China suspends tax collection from mutual funds

Chinese regulators have temporarily suspended the corporate taxes imposed on domestic mutual funds in a bid to boost the country's plummeting stock prices, China's Ministry of Finance and State Administration of Taxation said in a statement on Wednesday.

The exemption applies to all income from investment funds in the securities markets, including stock and bond trading, interest or dividends from stock or bond investment. Besides, investors who gain income from such funds can also benefit from the suspension.

Mutual funds are playing a pivotal role in China's fund management industry, with over 350 funds holding around US$450 billion worth of assets by the end of 2007, a more than tenfold increase compared with US$40 billion in 2005.

Foreign investors, including mutual funds, are only allowed to invest in Chinese stocks under the qualified foreign institutional investors (QFII) scheme, under which the authorities have recently lifted the total investment quotas up to US$30 billion, with plans to further increase the quota.