Chinese shares closed slightly lower Monday despite a package of favorable government efforts to boost the sluggish market.

The Shanghai Composite Index, which covers yuan-denominated A shares and foreign-currency B shares on one of the two bourses on the Chinese mainland, dropped by 2 points to close at 1,106.29 points, down by 0.18 percent over the previous trading session.

The Shenzhen Composite Index, meanwhile, which tracks the smaller of the two stock markets' on the Chinese mainland, closed at 2,879.77 points, down by 2.50 points, or down by 0.09 percent.

The overall transaction volumes of the two markets was valued at 14.9 billion yuan (1.81 billion US dollars), much lower than the previous session.

The two markets fell by about 2 percent during the morning session, but rebounded in the afternoon session, helped by two decisions by the Ministry of Finance and the State Administration of Taxation to exempt some equity transactions from stamp tax and dividends from corporate and personal income tax, and tax only half of dividends for individual investors.

The two government departments said the moves were designed to support the experiment to sell non-tradable shares and promote the development of the country's bearish stockmarket.

The two decisions were only part of the package of attempts made by the central authorities since Saturday to stabilize the capital market.

The China Securities Regulatory Commission made public a decision Sunday to allow majority shareholders involved in the ongoing experiment of split share structure to increase their volume of tradable shares. Reports that the central bank to offer loans to selected troubled securities firms was also confirmed by official media.

Because of the split share structure and other factors, the Chinese capital market has experienced downward pressure during the past four consecutive years. The Shanghai index is now only about half of what it was in 2001, compared with an average annual growth of 9.4 percent of the country's gross domestic product in the past 25 years.

The split share structure refers to the existence of two thirds of non-tradable shares of the domestically listed firms, mostly State-owned. That means only one third of them are floated.

Experts say such an irrational structure has put the public investors at a worse position than the actual controllers of the listed companies in making corporate policies and disposing of the companies' profits and assets.

China launched an experiment to tackle the issue of non- tradable shares in early May of this year.

Source: Xinhua