CITIC Construction Investment: Accelerating Regional Integration and Mergers & Acquisitions as Dual Main Lines Rewrite the Securities Industry Landscape

CITIC Construction Investment Research reports that Dongwu Securities is planning to acquire Donghai Securities, marking a new stage in provincial financial resource integration. Since 2025, industry mergers and acquisitions have been densely implemented, forming a dual mainline pattern: top-tier firms forming strong alliances to create first-class investment banks, and local state-owned assets leading regional consolidation to develop domestic industry leaders. The driving logic has shifted from policy-led to a dual resonance of policy and market, promoting the industry from dispersed competition to tiered stratification. The leading pattern is restructuring into multiple strong players, with weaker brokers accelerating cleanup, and regional integration of small- and medium-sized brokers opening a differentiated development path.

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CITIC Construction Investment: Accelerated Regional Integration and M&A Rewrite Industry Landscape

Dongwu Securities plans to acquire Donghai Securities, initiating a new phase of provincial financial resource integration. Since 2025, industry M&A activity has been intense, creating a dual mainline pattern: “top-tier strong alliances to build first-class investment banks” and “local state-owned assets leading regional consolidation to develop domestic industry leaders,” which has become the core feature of this round of mergers. Since 2025, there have been 11 M&A cases, the densest in the past decade. Key points include:

1. Headquarters consolidation: Guotai Junan completed its merger with Haitong Securities; China International Capital Corporation announced the absorption of Dongxing Securities and Cinda Securities, representing large-scale integration of major comprehensive brokers, directly responding to regulatory calls to cultivate internationally competitive first-class investment banks.

2. Regional consolidation: Led by local state-owned assets, regional financial resource integration is a core incremental driver. Cases include Dongwu Securities’ planned acquisition of Donghai Securities, Western Securities’ acquisition of Guorong Securities, and Guoxin Securities’ acquisition of Wanhua Securities, all focusing on regional broker resource integration. This helps resolve homogeneous competition and consolidates local resources to create regional leaders.

3. Driving logic shift: From policy-driven to market-policy dual resonance, M&A may become a development necessity for brokers. Historically, M&A was mainly to mitigate regulatory risks; now, it reflects proactive market choices aligned with policy guidance. Lower fee rates for light-capital businesses, rising capital thresholds for heavy-capital businesses, and squeezed profit margins for small- and medium-sized brokers make consolidation essential for competitiveness. Policies like the “New Nine Regulations” support M&A to strengthen brokers, creating a virtuous cycle.

Core Impact of M&A

From an industry perspective, the current wave of broker M&A centered on top-tier alliances and regional state-owned asset integration is gradually transforming the long-standing “big but not strong, small and dispersed, homogeneous internal competition” pattern, accelerating industry shift from “pyramid-like dispersed competition” to “tiered stratified competition.” Specifically:

1. Reconstruction of top-tier broker tiers: Moving from “one super, many strong” to “multiple strong players,” with internationalization becoming the new core competitive track. China’s securities industry has long been dominated by CITIC Securities as the leader. In this wave, Guotai Junan and Haitong Securities have merged, and China International Capital Corporation’s plans to integrate Dongxing and Cinda Securities are underway, marking a new era of “multiple strong players.”

Previously, competition focused on domestic market share, with homogeneity and internal competition issues. Post-integration, more top brokers possess the capital to compete with international investment banks. Regulatory goals to develop 2-3 globally competitive first-class investment banks support this internationalization, enabling top brokers to extend their core competitiveness from domestic to global markets, potentially rivaling top international firms.

2. Accelerated cleanup of weaker institutions and regional broker alliances forming a second-tier: The wave of M&A deepens, with stark differentiation among small- and medium-sized brokers. Homogeneous, core-weak brokers lacking competitiveness face survival crises, while those with regional advantages or niche capabilities find new growth paths through regional consolidation or boutique transformation, leading to industry reshuffling.

Historically, license scarcity allowed brokers to survive without core competitiveness, relying on traditional channels. Now, license resources are concentrating among top and regional leaders. For brokers lacking shareholder backing, local barriers, or unique business models, traditional channels are no longer sustainable, and survival is increasingly difficult.

On December 6, 2025, CSRC Chairman Wu Qing emphasized: “First-class investment banks are not exclusive to top institutions or patents. Small and medium brokers should leverage their advantages and develop in niche areas, focusing resources on specialized client groups, key regions, and developing ‘small but beautiful’ boutique, specialty, and service-oriented investment banks.” This policy provides clear guidance for small brokers to break through via regional and niche development.

Under this context, regional financial resource integration led by local state-owned assets offers a path for small and medium brokers to band together and break through. With government support, regional brokers can consolidate local branches, clients, industry resources, and capital to build regional leaders. These institutions can gain resource advantages from local government projects, listed companies, and high-net-worth regional clients, forming “regional moat” difficult for national top brokers to challenge. They need not compete head-on across all sectors but can focus on deep local market engagement and regional economic integration, ensuring stable revenue and profits, serving as key financial drivers for local high-quality development. As regional financial integration continues, these institutions will grow into a second-tier industry layer, distinct from national leaders.

Market Price Volatility Uncertainty: Capital market prices are influenced by macroeconomic fluctuations, global economic changes, and investor sentiment, which can cause stock price swings and impact valuations of brokers, insurers, and other institutions. The performance of banking and financial sectors is heavily affected by market prices and trading volumes.

Profit Forecast Uncertainty: Earnings of securities and insurance sectors are affected by multiple factors, and forecasts of industry valuation and performance carry uncertainties. Increased internal competition may also lead to deviations in predictions.

Technological Innovation: Rapid development of emerging technologies requires financial institutions to continuously adapt. Faster technological updates entail high R&D and talent training costs, potentially increasing operating costs for brokers and insurers. The burst of technological innovation also involves uncertainties.

(Source: First Financial)