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China plans to cut stamp duty on stock trading by up to 50% to revive sentiment-sources


HONG KONG/BEIJING — Chinese authorities are considering slashing stamp duty on domestic stock transactions by 50 percent, three people with knowledge of the matter have said, in a fresh bid to revitalize the country’s ailing stock market.

Chinese regulators including the Ministry of Finance, under the guidance of the State Council, submitted a draft proposal to the cabinet earlier this month, two people said, adding that a decision could be made and announced as early as Friday.

The proposal to reduce the current 0.1 percent stamp duty on securities trading suggests a 20 percent or 50 percent reduction, which would be the first such reduction since 2008, the two said. sources.

The amount of the cut, which has yet to be announced, will likely be set at 50 percent, they said.

All sources declined to be named as they were not authorized to speak to the media.

The State Council Information Office, which handles media inquiries on behalf of the government, did not immediately respond to a faxed request for comment. The Ministry of Finance and the China Securities Regulatory Commission (CSRC) also did not immediately respond.

The proposed cut comes after Chinese leaders pledged in late July to reinvigorate the world’s second-largest stock market, which has been struggling as the country’s economic recovery falters and woes in the property market worsen.

The country’s blue-chip index, the CSI300, fell to its lowest level in nine months and is down 11% from its peak in April, as hopes for a post-Covid economic recovery and a boom in corporate profits have faded. By comparison, the MSCI World Stock Index is up 11 percent year-to-date.

Sluggish growth

The world’s second-largest economy grew sluggishly in the second quarter due to weak domestic and external demand, prompting analysts to lower their growth forecasts for the year in the absence of policy action. major support.

Amid growing headwinds, Beijing took a series of actions to support markets, including a smaller-than-expected cut in a key lending benchmark and other measures earlier this week.

Modest stimulus measures have so far failed to satisfy investors or revive a slowing economy, as they demand stronger policy measures, including massive government spending.

In the latest such move, China’s central bank has asked some domestic banks to cut their overseas investments through the Bond Connect program, Reuters reported earlier on Friday, citing sources with direct knowledge of the issue. case.

On Aug. 18, China’s securities regulator unveiled a package of proposals, including backing stock buybacks and encouraging long-term investments to support the country’s stock market, estimated at $11 trillion. dollars.

The CSRC also said stabilizing the stock market was a priority. “Without a relatively stable market environment, there is no basis for reviving the market and improving confidence.”

Any reduction or exemption from stamp duties, including that on stock exchange transactions, may be decided by the Council of State Affairs, according to the needs of the economic and social development of the country, in accordance with the Chinese law on the right of stamp coming into force in July 2022.

“A reduction in stamp duties (on stock transactions) can help reduce investment costs and stimulate business activity,” analysts at brokerage Topsperity Securities said in a note. “Compared to previous policy measures, a stamp duty reduction could have a greater effect on restoring investor confidence. In the longer term, the impact could be limited.

China’s tax revenue totaled 20.37 trillion yuan ($3.02 trillion) last year, of which 276 billion yuan, or 1.35 percent, came from stamp duty on securities transactions, according to official data.

Earlier this month, Bloomberg first reported that Chinese authorities are considering lowering stamp duties on stock transactions.

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Merry C. Vega is a highly respected and accomplished news author. She began her career as a journalist, covering local news for a small-town newspaper. She quickly gained a reputation for her thorough reporting and ability to uncover the truth.

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