China Cuts Stamp Duty to Boost Stock Market amid Economic Struggles
BEIJING/SHANGHAI, Aug 27 (Reuters) – China has decided to halve the stamp duty on stock trading effective Monday in an effort to revitalize the struggling market as the country’s economic recovery faces challenges.
The finance ministry announced on Sunday that it will be reducing the 0.1% duty on stock trades “in order to invigorate the capital market and boost investor confidence.” This move comes as a response to a significant fall in the key share index, which reached nine-month lows.
Before the official announcement, Xie Chen, a fund manager at Shanghai Jianwen Investment Management Co, expressed skepticism about the impact of such a policy, stating, “The rebound could last for just two to three days, or even shorter.”
In addition to the stamp duty cut, the China Securities Regulatory Commission (CSRC) has also introduced measures to bolster investor confidence in listed companies. The CSRC announced on Sunday that China will slow down the pace of initial public offerings (IPOs) and further regulate major shareholders’ share reductions. Stock exchanges in China have also lowered their margin financing requirements, according to the CSRC’s announcement.
China’s leaders have pledged to revive the stock market, the second-largest in the world, which has been struggling due to the post-pandemic recovery slowdown and a deepening debt crisis in the property market.
While Beijing has implemented several measures to support the market, including a smaller-than-expected cut in a key lending benchmark last week, investors are calling for a stronger policy response, including substantial government spending.
The latest data on Sunday revealed that profits at China’s industrial firms have continued to decline for the seventh consecutive month, indicating weakening demand and its impact on companies.
Sources familiar with the matter have informed Reuters that regulators, including the Ministry of Finance under the guidance of the State Council, have submitted a draft proposal for the stamp duty cut to the cabinet earlier this month.
It remains to be seen how effective these measures will be in revitalizing the stock market and boosting investor confidence amidst China’s economic struggles.
Reporting by Judy Hua and Joe Cash in Beijing, and Li Gu in Shanghai; Editing by William Mallard