China’s 12 trillion yuan (US$1.6 trillion) brokerage sector will continue to remain fragmented and competitive, despite the ongoing consolidation mandated by Beijing to create world-class entities, according to S&P Global Ratings.
“Over the next two years, the landscape will not likely change considerably,” the rating agency said in a report on Friday. “The top players will grab a bit more market share, but the sector will likely remain fragmented and competitive.”
China’s securities sector, with more than 140 firms, faced intense competition in pricing, services and underwriting standards, prompting repeated regulatory warnings, the firm said. “Aggressive underwriting practice could increase securities firms’ risks.”
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Recently, some Chinese investment banks offered fees as low as 0.01 per cent in a bid to sponsor and underwrite the Hong Kong share offering of Contemporary Amperex Technology, or CATL, the world’s largest electric vehicle (EV) battery maker, the state-owned newspaper Securities Times reported. CATL is said to be seeking at least US$5 billion from the secondary listing.
China Securities Regulatory Commission penalised Zheshang Securities in November for several shortcomings. Photo: Reuters alt=China Securities Regulatory Commission penalised Zheshang Securities in November for several shortcomings. Photo: Reuters>
The China Securities Regulatory Commission’s supervision bureau in eastern Zhejiang province penalised Zheshang Securities in November for lacking sufficient independence in certain sponsorship work and charging fees significantly below industry standards.
In March 2024, CSRC issued guidelines to restructure the industry to sharpen its competitiveness and to build world-class investment banks by 2035.
At least six merger plans have been rolled out since then. Late last year, Guotai Junan Securities and Haitong Securities announced a 103 billion yuan merger to create China’s biggest brokerage.
On Friday, Chinese media reported the new entity would be named Guotai Haitong.
Last month, Reuters reported that state-owned China International Capital Corp would merge with China Galaxy Securities, which was denied by both firms.
Deals announced since late 2023 accounted for about 20 per cent of the sector’s total assets as of the end of June 2024, according to S&P’s estimates.
The merger spree was likely to continue, it added, considering the regulator’s push for high-quality players to enhance the sector’s ability to support China’s economic transition and innovation, as well as to meet wealth management needs.
Compared with global peers, China’s top investment banks are smaller and more domestically focused. But many firms are expanding overseas to meet China’s growing demand for global asset allocation and support businesses expanding abroad. That could create both opportunities and challenges as uncertainties around geopolitical tensions rise, according to the firm.
But consolidation is only the beginning of a process that could take at least two years, according to S&P.
“Combining two balance sheets is only the starting point,” it said.
After merging, brokerages are expected to focus on improving their ability to serve clients by offering a wider range of financial products and enhancing risk management as their businesses grow and expand geographically.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2025. South China Morning Post Publishers Ltd. All rights reserved.
