Chinese Stocks Plummet After Trading Tax Tripled

Move aimed at containing market bubble; could trigger serous sell-off

By Sam Gale Rosen, Newser Staff

Posted May 30, 2007 8:53 AM CDT

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Chinese Stocks Plummet After Trading Tax Tripled — A stock investor reads a local newspaper with headline saying "Stamp tax for security trade has been adjusted to 0.3 percent from today" at a securities' company Wednesday May 30, 2007 in Shanghai, China. Chinese stocks plunged Wednesday after the government raised a tax on trading in an effort to cool... (Associated Press)

Chinese stocks plummeted today, after the finance ministry tripled a tax on trades in an effort to deflate a worrisome stock market bubble. A week ago, the ministry publicly pledged not to raise the tax. The reversal opens the government to heavy criticism if it triggers a serious rout.

In China, millions have invested their savings in the surging market, which has quadrupled since the start of last year, the Times reports. Yesterday's 6.5% decline was the worst since a February plunge of 8.8% that unsettled investors around the world. The Journal said the move may not be enough to curb the runaway market; the Shanghai index is still 46% above the February plunge. (Read more China stories.)