MNI China Press Digest Nov 18: Tax, Deposit Transfer, FX

Highlights from Chinese press reports on Tuesday:

• Active capital-market trading this year has significantly boosted tax revenue in related industries, Securities Daily reports, with equity transfers and increased dividend pay-outs supporting personal income tax revenue. According to Ministry of Finance data, stamp tax on securities transactions reached CNY162.9 billion in the first 10 months, representing an 88.1% year-on-year increase. In the first 10 months, national tax revenue reached about CNY15.34 trillion, up 1.7%. The Securities Daily noted that weakness in the producer price index (PPI) has weighed on tax-revenue growth, given that the data is calculated at current prices.
• The People’s Bank of China’s October financial statistics report showed that household and corporate deposits declined by CNY1.34 trillion and CNY1.09 trillion, while non-bank deposits increased by CNY1.85 trillion, Yicai reports. Many market participants said this shows the strong stock-market performance has prompted households to shift deposits into equities. However, several authoritative industry experts interviewed by Yicai argued that when households, companies and non-bank institutions use deposits to buy or sell stocks, this merely redistributes deposits and equities among different entities, leaving the overall volume of deposits largely unchanged. An industry expert noted that when deposit rates fall, investors may favour wealth-management or asset-management products, with most of these funds still to circulate back into bank-related instruments such as negotiable certificates of deposit or bonds, ultimately reappearing as interbank deposits or deposits held by operating entities.
• China’s foreign-exchange market remained broadly balanced in October, according to Li Bin, spokesperson at the State Administration of Foreign Exchange. Banks recorded a settlement-and-sales surplus of USD17.7 billion during the month, a decrease from September but broadly consistent with the average levels during the first nine months, Li noted. He added that while September experienced a modest net capital outflow from non-bank sectors due to the National Day and Mid-Autumn holidays, net capital inflows increased in October. Taken together, the two months produced an average monthly net cross-border inflows of USD24 billion.