BEIJING, CHINA - China will impose a 20 percent tax on income from the sale of restricted shares, effective Jan. 1, the official Xinhua news agency reported on Thursday, in a move that could offer stability to the stock market.

Income from the sale of ordinary shares, including those in public offerings and secondary trading, would continue to be exempt from taxation, it added.

The rule could make it less desirable for companies'founding shareholders to sell shares privately ahead of the expiry of their non-tradeable period, which can hurt market sentiment.

The rule may also be a partial clampdown on excessive gains by founding shareholders who sell non-traded state-owned or institutional shares right after listings.

China has not taxed income from share sales by individuals since 1994 as it has sought to encourage the development of its capital market, Xinhua said.

Shanghai Composite Index rose 0.45 percent on Thursday, ending 2009 with a solid 80 percent gain as one of the world's best performing major markets, riding brightened prospects for economic recovery and corporate earnings.