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. Last Updated: 07/27/2016

China Plans to Allow Margin Trading

NEW YORK -- China plans to let investors buy shares using borrowed money and speculate on price declines by selling stock they do not own for the first time, to tap the nation's $4 trillion of bank deposits and boost trading.

The China Securities Regulatory Commission may select five brokerages to start margin financing and short-selling services this year, according to a draft plan sent to the Shanghai and Shenzhen stock exchanges. The pilot program may be expanded to other companies later.

"The move will inject lifeblood into the stock market,'' said Qiu Zhicheng, an analyst at Haitong Securities in Shanghai.

The changes may generate income for brokerages and boost funds available for investment as the government prepares to end a yearlong ban on public share sales, paving the way for offerings by companies including Air China.