The Chinese government has cut its stock transaction stamp duty for the first time in 15 years to revive the stock market amid an economic slowdown.
According to Bloomberg News on the 27th, China’s Ministry of Finance announced on the same day that it will cut the stamp duty to revitalize the capital market and enhance investor confidence.
China’s stock transaction stamp duty cut is the first since 2008 during the financial crisis. China raised its stamp duty to 0.3 percent in May 2007 when the stock market overheated with more than 300,000 new investors flowing in a day, but lowered it to 0.1 percent when the stock market plunged in April 2008.
Bloomberg said, “This is an important measure to restore confidence in the Chinese stock market. This will lead to an automatic rebound in the $9.6 trillion Chinese stock market, which is sensitive to policy changes that affect market liquidity.”
On the other hand, Hsieh Chen, a fund manager at Shanghai Jianwon Investment Management, told Reuters, “The stamp duty cut may give the market a boost in the short term, but it will not have much effect in the long run.”
Reuters pointed out that Chinese authorities have come up with a series of economic revival measures, including a policy rate cut on the 21st, but investors are demanding stronger policies such as large-scale government spending.
China’s Securities Regulatory Commission also said in a separate statement that it will slow down its initial public offering (IPO), further regulate major shareholders’ equity cuts, and lower margins.
Earlier on the 18th, the Securities Supervisory Commission announced support measures for the stock market to reduce stock trading costs, support treasury stock purchases, and introduce long-term investments.
It will also promote the development of equity funds and conduct research on extending stock trading hours, it added.
As a result, China’s stock exchanges, including Shanghai, Shenzhen, and Beijing, decided to lower their transaction fees from the 28th.
The Chinese stock market has also continued to decline as the Chinese economy has recently slowed down, mainly in the real estate market.
According to Bloomberg’s tally, net selling by foreigners in the Chinese stock market continued for 13 consecutive days until the 23rd of this month, marking the longest period ever.
The outflow of foreign funds from the Chinese market is attributed to growing concerns that the long-term slump in China’s real estate market will spread throughout the financial market.