Many institutions are currently engaged in a heated discussion regarding the adjustment of stamp duty, which is the tax levied on securities transactions. Lin Xipeng, a representative from China Merchants Securities, pointed out that while many countries and regions have imposed securities transaction tax, major securities trading markets tend to eventually abolish this tax. With the promulgation of the “Stamp Duty Law of the People’s Republic of China,” stamp tax on securities transactions in China will become an official tax category. The adjustment of this tax rate will be decided by the State Council and reported to the Standing Committee of the National People’s Congress for record. Currently, China has the lowest stamp duty rate in history compared to other countries that levy stamp duty.
Gao Ming, a representative from Galaxy Securities, highlighted that the reduction of stamp duty on securities transactions in China has occurred four times since 2000. Each time the stamp duty was lowered, the trading volume of the Shanghai Composite Index saw significant increases of 71%, 98%, 114%, and 139% respectively. This demonstrates that reducing the stamp duty helps lower investor costs, ultimately increasing market transaction scale. Several countries, including the United States, Japan, Germany, and the United Kingdom, have already canceled their stamp duty, suggesting that reducing or abolishing the stamp duty on securities transactions in China will assist A-shares in global competition.
However, Chen Gang from Soochow Securities cautioned that while the reduction of stamp duty can provide short-term stability and a temporary rebound for the stock market, it cannot fundamentally alter the trend of A-shares. The long-term sustainability of the market relies on factors such as the industrial cycle, economic recovery, and the effectiveness of other policies, including capital market reform. Furthermore, after the implementation of the Stamp Duty Law, the increased use cost of this market regulation tool may hinder its ability to serve as a timely boosting measure.
In the past 10 years, there have been fluctuations in the stamp duty on securities transactions in China. The amount collected exceeded 200 billion yuan in three years, including 275.9 billion yuan in 2022, 247.8 billion yuan in 2021, and 255.3 billion yuan in 2015. In contrast, three years saw collections of less than 100 billion yuan, with 47 billion yuan in 2013, 66.7 billion yuan in 2014, and 97.7 billion yuan in 2018. The stamp duty on securities transactions experienced positive year-on-year growth in seven out of the past ten years. The highest growth rate occurred in 2015, reaching 2.8 times, while there were three years with a decline in collections. Notably, in the first half of this year, the stamp duty on securities transactions reached the 100 billion yuan mark but experienced a year-on-year decline of 30%.
The adjustment of the stamp duty in A-shares has impacted the market in the past. Historical data shows that adjustments to the stamp duty influenced the performance of the Shanghai Composite Index. For instance, the lowering of the stamp duty in October 1991 from 6‰ to 3‰ marked the start of a major bull market, with the index increasing nearly seven times in half a year. Conversely, the increase in stamp duty from 3‰ to 5‰ in May 1997 coincided with the formation of a peak in the bull market, leading to a subsequent decline in the stock index. These examples illustrate the market’s sensitivity to stamp duty adjustments.
Recently, there has been a growing chorus of voices advocating for the reduction or even abolition of stamp duty to activate the capital market and boost investor confidence. The Beijing Business Daily even published a commentary suggesting that A-shares consider abolishing stamp duty. It is important to note that stamp duty was first imposed in Shenzhen in 1990, and subsequent adjustments have had varying effects on the market. The stamp duty adjustments in the history of A-shares have generated both positive and negative impacts on the stock index, demonstrating the market’s reaction to changes in stamp duty.
In conclusion, the ongoing discussions surrounding the adjustment of stamp duty on securities transactions have attracted significant attention from institutional investors and market participants. While reducing or canceling stamp duty may provide short-term stability and facilitate market participation, the long-term sustainability of the A-share market depends on multiple factors. However, historical data suggests that stamp duty adjustments have influenced the performance of the Shanghai Composite Index in the past. Therefore, any potential changes in stamp duty policy will likely be closely monitored by market participants and investors.