An investor looks at an electronic board showing stock information at a brokerage house on July 6, 2018 in Shanghai, China. Reuters/Elle Song acquires licensing rights
- The draft proposal was submitted to the cabinet earlier this month – sources
- Cuts may be announced soon according to Friday-sources
- If finalised, the stamp duty cut would be the first such step since 2008
- Analysts say the cut will provide a short-term boost to market sentiment
HONG KONG/BEIJING, Aug 25 (Reuters) – Chinese authorities are planning to cut stamp duty on stock trading by up to 50%, three people with knowledge of the matter said, in a bid to revive the country’s struggling stock market. In one more attempt. ,
Regulators including the finance ministry, under the guidance of the Council of State, submitted a draft proposal to the cabinet earlier this month, the two people said, adding that a decision could be announced as soon as Friday.
Both the people said the proposal to reduce the current 0.1% stamp duty on securities trading suggested a cut of 20% or even 50%, which would be the first such reduction since 2008.
The quantum of cut, which has not been reported earlier, is likely to be fixed at 50%, he added.
All the sources declined to be identified because they were not authorized to speak to the media.
The State Council Information Office, which handles media queries on behalf of the government, did not respond to a faxed request for comment. The Finance Ministry and the China Securities Regulatory Commission (CSRC) also did not respond.
The proposed cuts come after China’s leaders vowed in late July to reinvigorate the world’s second-largest stock market, which has been faltering as the country’s flagging economic reforms and a deepening debt crisis in the property market .
Fund manager Xie Chen said, “Such a policy is likely to give a short-term boost to the market, but will not have much effect in the long term. The rebound may only last for two to three days or even less.” In Shanghai Jianwen Investment Management Co.
“The change in the long-term trend of the market will be triggered by the expectation of economic recovery rather than the stamp duty cut.”
The country’s blue-chip CSI300 index (.CSI300) has fallen to a nine-month low, and is down 11% from its April peak as hopes of a strong post-Covid economic recovery dimmed and policymakers looked to deliver strong stimulus. I showed reluctance. By comparison, MSCI’s Index of Global Stocks (.MIWO00000PUS) is up 11% so far this year.
slow growth
The world’s second-largest economy grew at a slower pace in the second quarter amid weak demand at home and abroad, prompting analysts to lower their growth forecasts for the year in the absence of key support measures.
Against that backdrop, Beijing has taken a series of steps to shore up markets, including a smaller-than-expected cut in key debt benchmarks and other moves at the start of the week.
However, the modest stimulus has so far failed to satisfy investors, who are calling for a stronger policy response, including massive government spending.
In the latest such move, China’s central bank has asked some domestic banks to reduce their outside investments through the Bond Connect scheme, Reuters reported on Friday, citing sources with direct knowledge of the matter. Report was given.
China’s securities regulator unveiled a package of proposals on August 18, including supporting share buybacks and encouraging long-term investments to support the country’s $11 trillion stock market.
The CSRC also said that stabilizing the stock market is a priority. “Without a relatively stable market environment, there is no basis to revive the market and lift sentiment.”
Any reduction or exemption of stamp duty, including stock trading, may be decided by the State Council based on the needs of the country’s economic and social development.
China’s fiscal revenue totaled 20.37 trillion yuan ($3.02 trillion) last year, with stamp duty on securities transactions accounting for 276 billion yuan, or 1.35%, official data showed.
Earlier this month, Bloomberg first reported that Chinese authorities were considering cutting stamp duty on stock trades.
Huang Yan, general manager of private fund manager Shanghai Qiuyang Capital Co., said cutting stamp duty makes no sense for a market that lacks confidence in the economy.
“The economy is in terrible shape,” Huang said. “Cutting stamp duty does not solve the problems hindering China’s economic growth.”
Reporting by Hong Kong and Beijing newsrooms; Additional reporting by the Shanghai newsroom; Editing by Sumeet Chatterjee, Lincoln Fest and Kim Coghill
Our Standards: The Thomson Reuters Trust Principles.
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