China lower stamp duty for stock transaction

China just lower the stamp duty for stock transaction last week. As a result, the China stock market rally strongly. What is the rationale?

If you still remember, last year, they adjusted the stamp duty to curb the speculation. Immediately, the stock market plunged, because that signal the authority policy stance. It is puzzling to most of us here, that the small stamp duty amount would have a huge impact to the market. If you think rationally, it is really a very small percentage. However, we have to admit that it is a sentiment issue.

This time round, what happened was people get disillusioned about the Beijing Olympic story (that is stock market won't fall before the Olympic). More are calling for the authority to "save" them. Finally, they announced the lower stamp duty.

We have to admit that this is not a good solution. The role of market regulator is to regulate the market, to make sure it function as intended. Not to influence the market like what has happened. This would make people think that every time the authority would come to their rescue. This is no good to China market in the long term.