China's revenue from stamp duty on stock transactions surged by more than 80 percent in the first eight months of 2023, reflecting a notable rebound in market activity driven by increased investor interest amid the artificial intelligence (AI) sector boom. According to data released by the Ministry of Finance, stamp duty collections reached 216 billion yuan (approximately HK$253 billion) from January through August, marking an 82 percent increase compared with the same period last year.
This growth aligns with a 72 percent rise in average daily trading volumes on mainland China’s stock exchanges, where the AI sector has played a significant role in invigorating demand for equities. Although the broader market benchmark, the CSI 300 Index, remained largely flat over the eight-month period, technology-focused indices saw considerably stronger performance. The chip-oriented Star Market 50 Index, for instance, gained 23 percent year-to-date on the backdrop of surging interest in tech stocks. Daily turnover on the mainland’s exchanges averaged 2.67 trillion yuan during this timeframe.
China’s stamp duty on stock sales, currently set at 0.05 percent, is a key instrument used by authorities to influence market sentiment. The rate was halved in 2023 from its prior level in an effort to arrest declining share prices and encourage trading. Historically, the government began reducing stamp duty in 2007 from as high as 0.3 percent and removed the tax on stock purchases in 2008 to support market activity.
Despite the strong overall growth in stamp duty revenue, August saw a moderation with an 18 percent year-on-year increase—the slowest monthly gain recorded this year. This slowdown is largely attributed to deteriorating sentiment amid a retreat in global AI stock trading, which dampened investor enthusiasm. The Star Market 50 Index experienced a sharp 26 percent drop in July but partially recovered with a 3 percent rise in the following month.
Challenges in the technology sector’s outlook have intensified due to monetary tightening measures by major central banks and rising long-term sovereign bond yields. The U.S. Federal Reserve raised interest rates for the first time in three years in late September, followed by a similar move from the Bank of Japan. These developments contributed to multi-year highs in bond yields, creating headwinds for equities amid concerns about inflation and heavy debt issuance.
Market analysts suggest a shift in trading dynamics is underway. Li Lifeng, an analyst at Huaxi Securities, noted that future market activity might focus more narrowly on selective quality stocks rather than the broad-based gains and speculative trading seen in the previous AI-driven rally.
In a related development, the China Securities Regulatory Commission announced last week a plan to incentivize whistle-blowers in 17 ongoing disciplinary investigations. These cases involve alleged violations such as improper corporate disclosures, insider trading, and fraudulent accounting, a move seen by some market participants as an attempt to reinforce regulatory oversight and support investor confidence.