China will halve the stamp duty on stock transactions.

On Sunday,Domestic foreign exchange agents China's Ministry of Finance announced in a brief statement that it would lower the stock transaction stamp tax by 0.1% to invigorate the capital market and boost investor confidence. This is the latest measure China, the world's second-largest economy, has taken to revitalize its struggling stock market amidst sluggish recovery.

Xie Chen, a fund manager at Shanghai Jianwen Investment Management Co., mentioned before the announcement that there are many options to stimulate financial markets like stocks, and lowering trading costs is just one of them. However, in the current economic and financial climate, reducing stock transaction fees may only boost the market in the short term without having a significant long-term effect.

With the substantial weakening of the post-pandemic economic recovery and deepening debt crisis in the real estate market, China's stock market, the world's second-largest, has been languishing. Chinese authorities stated last month that there were plans to revitalize the stock market.

Lowering stock transaction costs has always been one of the common measures taken by the Chinese government to support the stock market. On September 19, 2008, after China's stock market first began unilaterally imposing a stamp tax, the Shanghai Composite Index surged 9.45%, and continued to rise by 7.77% the following day, accumulating a gain of 20.99% over five trading days.

So far, the Chinese government has taken a series of measures, including reducing a key loan benchmark last week by a margin smaller than expected. However, investors are calling for a stronger policy response from the authorities, including significant government spending, to stabilize the pessimistic economic outlook and boost confidence in stocks and the financial market as a whole.

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