Banks such as the Industrial and Commercial Bank of China (ICBC), Bank of China (BOC), China Merchants Bank, and the Pudong Development Bank are among those that will benefit in 2007 under the preferential tax policy.

News that the Chinese government is expected to pass the unification of corporate tax bill in 2007 triggered positive market sentiment in late December.

Shares in banks such as the ICBC and BOC increased by 65 and 50 percent respectively in December.

Meanwhile, the profit of companies in traditional industries such as iron and steel, coal, papermaking, and non-ferrous metals will also benefit from the tax cut.

Companies such as China Unicom, Wuliangye Group Co Ltd and Kweichow Moutai Co Ltd will be highly sought after in the stock market.

As the new tax system will be based more on sectors than regions, high-tech companies, especially biotech and aerospace firms, will benefit from continued preferential tax rates.

Preferential rates will also be granted to sectors such as shipbuilding, equipment and machinery sectors, banks, insurance, logistics, and traditional labor-intensive service sectors.

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