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 of top-tier mergers to create first-class investment banks and regional consolidation led by local state-owned assets to develop domestic 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 the Securities Industry Landscape

Dongwu Securities is planning to acquire Donghai Securities, initiating a new phase of provincial financial resource integration. Since 2025, industry M&A has been densely executed, forming a dual mainline pattern of strong alliances to build top-tier investment banks and regional consolidation led by local state-owned assets to develop domestic leaders. The driving logic has shifted from policy-driven to a dual resonance of policy and market, pushing the industry from fragmented competition toward tiered stratification. The core effects include:

1. Reshaping the top-tier broker echelon from “one super, many strong” to “multiple strong players,” with internationalization becoming the new core competition track. Historically, China’s securities industry has maintained a “one super, many strong” pattern led by CITIC Securities. In this wave of industry M&A, Guotai Junan and Haitong Securities have completed mergers, and China International Capital Corporation (CICC) has announced mergers with Dongxing Securities and Cinda Securities, representing large-scale consolidations of comprehensive brokers, directly responding to regulatory calls to cultivate globally competitive first-class investment banks. Meanwhile, regional consolidation led by local state-owned assets—such as Dongwu Securities’ planned acquisition of Donghai Securities, Western Securities’ acquisition of Guorong Securities, and Guosen Securities’ acquisition of Wanhua Securities—focuses on regional resource integration, alleviating homogeneous competition and consolidating local resources to create regional leaders.

2. The driving logic of M&A is shifting from policy-led to a dual resonance of market and policy, making M&A a potential necessity for broker development. Historically, broker M&A was mainly a policy-driven risk mitigation tool; now, it reflects proactive choices by market entities aligned with policy guidance. On one hand, declining fee rates for light-capital businesses and rising capital thresholds for heavy-capital businesses compress profitability for small- and medium-sized brokers, making integration essential for competitiveness. On the other hand, policies like the “New Nine Regulations” support brokers through M&A and restructuring, providing institutional guarantees and fostering 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 the industry’s shift from a “pyramid-like dispersed competition” to tiered stratification. Specifically:

1. The top-tier broker echelon is being reconstructed from “one super, many strong” to “multiple strong players,” with internationalization becoming the new core competitive arena. For a long time, China’s securities industry has been dominated by CITIC Securities as the leader. Now, Guotai Junan and Haitong Securities have merged, and CICC’s plans to integrate Dongxing and Cinda Securities are underway, marking the industry’s entry into a “multi-strong” era.

Previously, competition among top brokers focused mainly on domestic market share, with prominent homogeneity issues. Post-integration, many top brokers now possess the capital strength to compete with international investment banks. Regulatory goals to develop 2-3 globally competitive first-class investment banks suggest that top brokers’ international expansion will receive stronger support. The new pattern extends their core competitive boundaries from domestic to global markets, potentially enabling them to benchmark against top international firms.

2. The cleanup of weaker institutions accelerates, with regional brokers forming alliances to build a second-tier differentiated competition. The wave of M&A deepens, with significant divergence in impact on small- and medium-sized brokers: those lacking core competitiveness face continuous marginalization and survival crises; those with regional advantages or niche capabilities find new growth paths through regional consolidation or boutique transformation, leading to a deep reshuffle of the sector.

Historically, the scarcity of licenses allowed the industry to operate on a “license equals survival” basis, enabling weaker brokers to sustain operations via traditional channels. Under the current wave, license resources are increasingly concentrated among top and regional leaders. For brokers lacking strong shareholders, local competitive barriers, or specialized businesses, relying solely on traditional channels is no longer viable, and their survival space is shrinking.

On December 6, 2025, Wu Qing, Chairman of the China Securities Regulatory Commission, stated at the China Securities Industry Association that “a first-class investment bank is not exclusive to top institutions” and that small and medium-sized firms should leverage their advantages and develop in niche areas, focusing resources on specific segments, customer groups, and regions to build “small but beautiful” boutique, specialized, and service-oriented investment banks. This provides clear policy guidance for small and medium brokers to break through via regional deep cultivation and specialization.

Against this backdrop, regional financial resource integration led by local state-owned assets offers a development path for small and medium-sized local brokers to band together and break through. Under the coordinated promotion of state-owned shareholders, regional brokers can consolidate local branches, clients, industry resources, and capital to build regional leaders. The integrated entities can secure resources from local governments’ major projects, listed companies, and high-net-worth regional clients, even establishing regional “moats” difficult for national top brokers to shake. These regional leaders do not need to compete homogeneously across all sectors with top brokers; by focusing on local markets and deeply integrating with regional economies, they can achieve stable revenue and profit, serving as key financial vehicles for high-quality local economic development. As regional financial integration continues across provinces, these institutions are expected to grow into a second-tier industry echelon, distinct from national leaders.

Market Price Fluctuation Uncertainty

Factors influencing capital market prices include macroeconomic fluctuations, global economic changes, and investor sentiment, all of which can trigger stock price movements and impact valuations of brokers, insurers, and other institutions. The performance of the banking and financial sectors is more affected by market prices and trading volumes.

Uncertainty in Corporate Profit Forecasts

Profits in securities and insurance industries are affected by multiple factors, and forecasts of industry valuation and performance carry uncertainties. Intensified internal competition may also lead to deviations in predicted results.

Technological Innovation and Iteration

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

(Source: Yicai)