China’s revenue from stamp duty on stock sales surged 82 per cent year on year in the first eight months of the year, reflecting a sharp increase in trading activity as investor interest in technology and artificial intelligence shares fuelled demand for equities.
The Ministry of Finance said China collected 216 billion yuan (US$32.3 billion) in stock stamp duty between January and August. The increase came as average daily trading values on mainland stock exchanges climbed 72 per cent over the same period.
The surge in activity has been concentrated particularly heavily in technology stocks. While the benchmark CSI 300 Index remained broadly flat during the first eight months of the year, the technology-heavy Star Market 50 Index gained 23 per cent, highlighting the extent to which investors focused on companies seen as beneficiaries of the artificial intelligence boom.
Stocks worth an average of 2.67 trillion yuan changed hands each day on mainland exchanges during the period, according to industry data.
Stamp-duty revenue is closely watched as an indicator of activity in China’s stock market. Beijing has repeatedly adjusted the tax as part of efforts to influence trading and investor sentiment. The current rate is 0.05 per cent and is paid by investors when they sell shares.
The government halved the stamp duty in 2023 as authorities sought to halt a decline in stock values. The longer-term effort to encourage trading dates back further: Beijing began reducing the tax in 2007, when the rate stood at 0.3 per cent, and removed the levy from stock purchases in 2008.
The pace of growth in stamp-duty revenue, however, slowed significantly in August. Revenue rose 18 per cent from a year earlier, the weakest monthly increase recorded this year, as a reversal in the global AI trade weakened sentiment and discouraged some trading.
The shift followed a sharp sell-off in technology shares. The Star Market 50 Index plunged a record 26 per cent in July before recovering 3 per cent in August, illustrating the volatility surrounding the technology sector after months of strong demand.
The outlook for technology stocks has also become more uncertain as monetary policy tightens internationally and government bond yields remain elevated.
The US Federal Reserve raised the benchmark interest rate for the first time in three years on Thursday, followed a day later by the Bank of Japan. Long-term government bond yields in both countries have reached multi-year highs this month amid concerns over inflationary pressures and a large volume of new debt issuance.
Higher interest rates and elevated bond yields can alter the relative attractiveness of equities and place additional pressure on highly valued technology stocks, adding another source of uncertainty for investors following the AI-driven rally.
Chinese regulators have meanwhile taken steps that some industry participants view as an effort to strengthen confidence in the domestic market. Last week, the China Securities Regulatory Commission said it would reward whistle-blowers in 17 cases involving disciplinary violations.
The cases cover a range of alleged breaches, including non-compliant corporate disclosures by listed companies, insider trading and fraudulent accounting.
The sharp rise in stamp-duty collections during the first eight months reflects the extraordinary volume of trading that accompanied the technology-led rally. But the slowdown in August suggests that the surge in activity is already facing a more complicated environment, with the global reversal in AI-related trading and tighter monetary conditions adding pressure to a market that remains heavily dependent on investor sentiment.
