China Considers Major Cut in Stamp Duty to Energize Stock Market
In an effort to reinvigorate China’s struggling stock market, authorities are reportedly planning to reduce the stamp duty on domestic stock trading by as much as 50%, according to sources familiar with the matter. This potential move comes as the country’s economic recovery faces challenges, and amidst growing concerns in the property market.
Regulators, including the Ministry of Finance, working under the guidance of the State Council, have submitted a draft proposal to cut the current 0.1% stamp duty on securities trading. The proposed cut, either 20% or 50%, would be the first of its kind since 2008, and sources indicate that the likely quantum of the reduction is set at 50%. A decision on this matter is expected to be announced as soon as Friday.
China’s CSI300 Index, a prominent blue-chip index, has recently hit nine-month lows and experienced an 11% decline from its peak in April. This decline contrasts with the global stock market’s positive performance, with MSCI’s global stock index showing an 11% increase this year.
The economic challenges faced by China, including sluggish growth in the second quarter due to weakened domestic and international demand, have prompted authorities to implement various measures to support the markets. Despite these efforts, investors are calling for more substantial policy measures, including extensive government spending, to boost investor confidence and stimulate economic growth.
The proposed reduction in stamp duty is seen as a potentially impactful step in repairing investor confidence and encouraging trading activity. Analysts at Topsperity Securities noted, “A cut in stamp duty (on stock trading) can help decrease investment cost and boost trading activity… the impact might be limited in the longer term.”
China’s fiscal revenue for the previous year reached 20.37 trillion yuan ($3.02 trillion), with stamp duty on securities transactions contributing 276 billion yuan or 1.35% to this total.
The State Council’s decision on the stamp duty reduction or exemption, as stipulated by China’s Stamp Duty Law, is based on the country’s economic and social development needs. This move is part of a broader strategy to stabilize the stock market and lift sentiment, as highlighted by the China Securities Regulatory Commission.