The Ministry of Finance and the State Administration of Taxation announced on the 27th that starting from August 28, 2023, the stamp duty on securities transactions will be halved in order to activate the capital market and boost investor confidence. This adjustment of the stamp tax rate on securities transactions reflects the central government’s commitment to an active capital market and its determination to protect the stock market.
The reduction in stamp duty rates for securities transactions has previously had a positive effect on the capital market, and this recent reduction is no exception. Following the announcement, individual stocks saw a rise in value and the turnover of the Shanghai and Shenzhen stock markets exceeded 1.1 trillion yuan. The Shanghai Index reported a 1.13% increase, the Shenzhen Component Index reported a 1.01% increase, and the ChiNext Index reported a 0.96% increase.
According to data, in 2022, China’s securities transaction stamp duty revenue reached 275.9 billion yuan. In the first seven months of this year alone, the stamp duty revenue from securities transactions reached 128 billion yuan. This policy adjustment sends a clear signal that the government is willing to prioritize market vitality over fiscal revenue.
The reduction in the stamp duty rate for securities transactions plays a crucial role in activating the financial market, especially the securities market. In the current economic situation and the new environment for the development of the securities market, the lower tax rates will substantially reduce transaction costs and build confidence in the securities market.
Furthermore, the halving of the stamp duty on securities transactions is aimed at reducing transaction costs and increasing market liquidity. This tax policy tool directly and inclusively reduces the tax burden for the majority of investors, increasing their willingness to trade and releasing more liquidity into the market.
With over 220 million individual investors in China’s stock market, the reduction in stamp duty will greatly benefit small and medium-sized investors and further promote inclusiveness in the capital market. This policy adjustment reflects the government’s commitment to tax reduction, fee reduction, profit sharing, and benefiting the people, which will significantly activate the capital market and improve investor confidence.
It is worth noting that after the announcement of the policy to halve the stamp duty on securities transactions, the China Securities Regulatory Commission (CSRC) released three consecutive policy measures aimed at further improving the market environment. These measures, including optimizing IPO and refinancing arrangements, regulating shareholding reduction behavior, and reducing the margin ratio of stock exchange financing, inject more confidence into the market and promote a virtuous cycle of investment and financing.
The “three arrows” of regulatory policies released by the CSRC respond to the market’s concerns and appeals for an active capital market. These measures not only stabilize market confidence but also promote ongoing reforms in investment, financing, and transactions within the capital market.
Overall, the reduction in stamp duty on securities transactions sends a clear and positive policy signal, indicating the government’s commitment to an active capital market and investor confidence. These measures, combined with the regulatory policies implemented by the CSRC, create a more favorable market environment and encourage further investment and economic growth.