The ongoing financial turmoil, that has seen the collapse of renowned financial institutions like Lehman Brothers and governmental rescue of others like Bear Stearns, Freddie Mac, Fannie Mae and now, AIG, is having far-reaching implications around the globe.

In order to shore up its ailing stock markets against further assault from global factors, China's finance ministry has eliminated a tax on share purchases from the coming Friday onwards. Additionally, the government announced plans to buy shares in three of the largest state-owned banks to shore up investor confidence in the world's second worst performing stock market this year.

China Investment Corp. (CIC), the nation's $200-billion sovereign wealth fund, will buy stakes in Industrial & Commercial Bank of China Ltd. (ICBC), Bank of China Ltd. and China Construction Bank Corp., the official Xinhua News Agency said in an announcement today. The 0.1 per cent stock transaction duty will be removed for purchases and levied only on sales starting tomorrow, it said.

CIC's unit Central Huijin Investment Co. will begin buying shares in the banks in the secondary market immediately, according to the Xinhua announcement. The agency didn't say how much Central Huijin, which already controls the nation's largest banks, may invest or give further details.

The Shanghai benchmark has fallen nearly 70 per cent since hitting a peak of 6,124.04 in mid-October of last year. China's banks mostly avoided the credit-market crisis that has rattled global stock markets, accounting for less than 1 percent of the $516 billion of losses and write-downs worldwide. ICBC earned a record 64.5 billion yuan ($9.42 billion) in the first half to become the world's most profitable bank. (See: ICBC of China becomes the most profitable bank on loans)

Still, ICBC shares have fallen 58 per cent this year in Shanghai, while Construction Bank has slumped 61 per cent and Bank of China is down 54 per cent. ICBC yesterday ceded its position as the world's most valuable bank to HSBC Holdings Plc after shrinking by $241 billion in less than a year.

On 24 April, the last time the stamp tax was cut, the Shanghai Composite Index soared 9.3 per cent - its biggest one-day percentage gain ever. The previous tax cut, to 0.1 per cent from 0.3 per cent, reversed a tax increase imposed in May 2007, when regulators were trying to restrain surging share prices.

This time also, the duty cut had a positive effect. Chinese stocks rebounded in the afternoon trading session after plunging earlier. ICBC's Shanghai-traded shares closed 0.6 per cent higher after tumbling as much as 8.5 per cent. Bank of China rose 2.7 per cent after dropping 5 per cent and China Construction Bank closed 0.5 per cent lower after losing 9.7 per cent.