By Sam Willie
Reuters reports a delay in the opening of the much-anticipated “Stock Connect”
scheme between the Hong Kong and Shanghai stock
exchanges. The scheme was meant to provide investors
in Hong Kong and mainland China direct access between markets, and was
considered an impressive move by the Chinese
government in their efforts to liberalize their equity markets. It is thought
that a lack of regulatory approval and a disagreement over capital gains tax has
caused this delay. Hong Kong does not charge capital gains, whilst the mainland
has a 10% tax, and a further 5.6% tax on business profits. Even when open, it
is unlikely that investors will flock to “Stock Connect” until they know the
true extent of their tax liability.
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