Many Chinese stocks are listed in Hong Kong, which does not levy capital gains tax on the exchange of shares. Exempting capital gains tax on transactions will encourage risk- and tax-averse traders who would otherwise prefer to use only Hong Kong markets to invest in China.
Also starting on November 17, qualified foreign institutional investors (QFIIs) and RMB-qualified foreign institutional investors (RQFIIs) will be temporarily exempt from capital gains tax. The announcement that QFIIs will be exempt has been delayed since the programmes’ launch in 2003, causing confusion for traders for more than a decade.
The Ministry did not state how long the exemption will last, however the news is certainly positive for both brokers and investors ready for the opening of the highly anticipated stock connect on Monday. The statement is also an encouraging step towards clarity in the often confusing Chinese market.
