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The Ministry of Finance on Wednesday raised stock trading stamp tax up to 0.3 percent. The new measure gave a heavy blow to the surging stock market. On Wednesday, Chinese stock market index witnessed a 6% drop and trade volume reached 410 billion yuan, a historical high point. More than 800 stocks dropped by 10%, the largest drop range within a day. Shanghai stock market dropped by 280 points, the largest drop since China entered into a bullish market.

Before the Chinese government issued the new regulation, its previous efforts to cool down the market seemed to have been always in vain, as more and more Chinese people plunged into the stock market, pushing up the stock index to go up further.

Since the beginning of this year, experts kept warning about the possible bubbles in the stock market. The government had also taken various measures to make sure that the stock index wouldn't go up too quickly. In order to reach the goal, Chinese government raised the interest rate twice. However, all these measures seemed to have been responded with an even more rapid growth in the stock market, although the market might fall slightly during the early trading hours.

As the new regulation was issued, most economists predict that the stock market may fluctuate for a while. However, they also say that the large dive in the stock market won't fundamentally affect the Chinese economy.

The Chinese government regards 4,000 points as an alerting line for the stock market. With the stock market hitting a new high day by day, most experts believe that Chinese stock market should make some adjustment now. So, in the long run, the big tumble on May 30 should be regarded as beneficial to the long-term development of the market, said Gao Huqing, an expert from the State Information Center.

He also said that in the long run, the bullish market wouldn't be fundamentally changed by the new measure.

His point was echoed by Ha Jiming, chief economist at the China International Capital Corporation Limited. According to Mr. Ha, the stamp tax raise won't change the rising trend of the stock market, it being only aimed at raising the operational costs for short-term profiteers. In addition, since the total tradable market capitalization in Chinese stock market accounts for only one-fourth of the national GDP, stock market tumble won't cause any major negative effects on the Chinese macroeconomy, Ha said.

The Morgan Stanley investment bank issued a report recently saying that if the A-share market continues to fall from the current level, its influence on the Chinese macroeconomy will still be rather limited.

However, it should be noted that the group of people who have just bought shares ahead of the new regulation will suffer most during this round of stock tumble. Experts say that the large decrease of market value will largely affect the life of this group of people.
 
Editor: Yan