In its most recent effort to support the ailing stock market as the world’s second-largest economy struggles to revive, China cut the stamp tax on stock trading in half with effect on Monday.
In a brief statement on Sunday, the finance ministry stated that it was lowering the 0.1% fee on stock trades “to energize the capital market and boost investor confidence.”
After a major stock index hit nine-month lows, Reuters reported on Friday that the government intended to reduce the duty by up to half.
Before the announcement, Shanghai Jianwen Investment Management Co. fund manager Xie Chen predicted that the policy will likely boost the market in the near term but have little impact in the long run. “The rebound may only last two to three days, if not less.”
In addition to the action taken by the finance ministry, the China Securities Regulatory Commission (CSRC) is implementing measures to support investor confidence in listed companies.
China will reduce the rate of initial public offerings (IPOs) as well as regulate share reductions by significant shareholders, the CSRC announced on Sunday.
According to the CSRC’s notice, Chinese stock exchanges have cut their margin funding requirements.
The second-largest stock market in the world has been in free fall as the post-pandemic recovery falters and a debt problem in the real estate sector worsens. China’s leaders promised late last month to revive the market.
Beijing has taken a number of steps, including last week’s smaller-than-anticipated reduction in a significant lending benchmark. Investors, meanwhile, are calling for a more forceful policy response, including significant government expenditure.
In the latest indication of the economy’s fragility, statistics released on Sunday revealed that sluggish demand had squeezed businesses, as profits at China’s industrial enterprises extended this year’s decline to a seventh month.
A draft proposal for the reduction in the stamp duty was given to the cabinet this month by regulators, including the Ministry of Finance, with the help of the State Council, according to sources with knowledge of the situation who spoke to Reuters.