China is considering cutting its stamp duty on stock trades in a bid to boost its stock market, according to a report from Bloomberg News. The country has also decided to stop publishing the youth unemployment rate.
Cutting the stamp duty on stock trades in order to boost the world's second largest equity market would really be a boost for Chinese equities if they were to cut that stamp duty. A stamp duty is like a levy on stock trades, and this would be the first time that it's cut since 2008. Now, the stamp duty currently sits at 0.1% on stock trades, and a draft proposal is being considered.
The Chinese equity market is valued at $9.9 trillion, so it's very sensitive when it comes to any type of shift in liquidity. And the stock market really is a barometer of consumer and business confidence. So the government is trying to boost investor confidence, trying to keep capital flowing into the markets.
The Chinese economy and households are going through some major challenges right now. One is being falling property taxes, the other is a weak job market. And you had Chinese equities that had a two-month rally, which then fizzled out. You had loanable funds that were selling into that rally believing that perhaps that whatever the Chinese government was doing in terms of stimulus to shore up the economy wouldn't be enough.
Now, China's stamp duty is on stock. Trading has been adjusted several times. It was adjusted, as I mentioned back in 2008, it was cut to support a market plunge. And in 2007, as you saw a market melt up go-- as the market was rallying, you had investors, China had more than 300,000 new investors entering the market. So they at that point raised the levy in order to sort of cool down that rally.
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