China to halve stamp duty on stock trading to boost flagging market

An electronic board displays the stock indexes of Shanghai and Shenzhen in the Lujiazui financial district following the outbreak of the coronavirus disease (COVID-19) in Shanghai, China October 25, 2022. REUTERS/Aly Song/File Photo LICENSING RIGHTS

BEIJING/SHANGHAI, Aug 27 (Reuters) – China halved stamp duty on stock trading effective Monday. This is the latest attempt to boost the flagging market as the recovery in the world’s second largest economy falters.

The Treasury Department said in a brief statement on Sunday that it would cut the 0.1% tax on stock transactions “to stimulate the capital market and boost investor confidence.”

Reuters reported on Friday that authorities planned to cut tariffs by up to half after a major stock index fell to a nine-month low.

“Such a policy is likely to give the market a boost in the short term, but won’t have much of an impact in the long term,” said Xie Chen, fund manager at Shanghai Jianwen Investment Management Co, ahead of the announcement. “The upswing could only last two to three days or even shorter.”

Along with the Treasury Ministry’s move, the China Securities Regulatory Commission (CSRC) is introducing measures to boost market confidence in investments in listed companies.

The CSRC said on Sunday that China will slow the pace of initial public offerings (IPOs) and further regulate divestments by major shareholders.

Meanwhile, exchanges in China have lowered their margin funding requirements, the CSRC note said.

China’s leaders vowed late last month to revive the stock market – the world’s second-biggest – which has faltered as the post-pandemic recovery falters and the debt crisis in the property market deepens.

Beijing has taken a number of measures, including a smaller-than-expected cut in a key lending benchmark last week. But investors are calling for a stronger policy response, including massive government spending.

In the latest sign of economic weakness, data on Sunday showed that Chinese manufacturing earnings extended this year’s slump to the seventh month, with weak demand weighing on firms.

Regulators, including the Treasury, led by the State Council this month submitted a draft proposal to the cabinet to cut stamp duty, people with knowledge of the matter told Reuters.

Reporting by Judy Hua and Joe Cash in Beijing and Li Gu in Shanghai; Edited by William Mallard

Our standards: The Thomson Reuters Trust Principles.

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