“There is no plan at all to impose a capital gains tax (on stocks),” a front page article in the official Shanghai Securities News quoted an authoritative source as saying.

“It is completely baseless, and to suggest that a capital gains tax could be levied at any time, just like the adjustment of the stamp duty, means to have no understanding of the law.”

Even if a capital gains tax was to be imposed, it would be subject to a long and arduous legislative process, taking years before it could win approval by the country’s lawmakers, the source said in the report.

China’s central bank vice governor Wu Xiaoling weighed in with similar comments on the issue at an industry conference in Tianjin, berating the handling of last week’s announcement of the tripling of stamp duty.

The news of a hike in stamp duty to 0.3 percent hit sentiment badly on May 30, when the main Shanghai benchmark index lost some 6.5 percent, with investors outraged after an official said that there would be no tax increase.

“China’s government has never gone back on its word. This is a violation of discipline of some bureaucrats and definitely does not represent the government,” Wu was quoted as saying by the Oriental Morning Post.

Analysts said such remarks were clearly aimed at easing recent investor anxieties that regulators might take even more action to cool a market that last year climbed 130 percent and continued to boom this year.

“The comments by Wu Xiaoling did ease the nerves among investors,” said Ning Dongli, analyst with Oriental Securities based in Shanghai.

“I think the sharp drops this time changed investors’ expectation that the market won’t always go up and the government policy does impact the market,” she said.

Trade has been very volatile since last Wednesday’s stamp duty announcement, prompting a series of declines that included a sell-off on Monday of 8.26 percent, the biggest one-day fall in over three months.

In February China’s markets tumbled nearly nine percent on talk about a possible capital gains tax, sparking turmoil in world equity markets.

Commenting on recent ups and downs in the market, Wu said it was par for the course, arguing that volatility is hard to avoid.

“The continuation of long term volatility is just not a problem — the crux of the matter is the fundamental trend, and the development of the Chinese economy is fundamentally very good,” she said.

That has not appeased an angry investing public, as widespread online comments have called into question the government’s credibility after the stamp duty was increased despite the official’s denial.

Thursday’s reports helped buoy battered market confidence.

At the close, the benchmark Shanghai Composite Index, which covers both A- and B-shares, closed up 114.49 points or 3.03 percent at 3,890.80 on turnover of 177.77 billion yuan (US$23 billion).

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