Chinese investment banks are slashing underwriting fees for bond issues to unprecedented lows — in some cases as little as $100 per deal — as they vie for mandates in an increasingly price-sensitive and state-dominated credit market. The development reflects intensifying fee wars across China’s financial sector, with regulators expressing growing concern about unsustainable pricing strategies.
According to a detailed report by the Financial Times, fierce competition among banks has been stoked by a surge in bond issuance by state-owned enterprises (SOEs), which tend to favor underwriters offering the lowest bids and a strong track record of deal experience. In contrast, private-sector issuance, particularly of high-yield bonds, has dwindled amid a sluggish macroeconomic environment.
One case drawing regulatory attention is a Rmb35 billion ($4.8 billion) debt sale by China Guangfa Bank, where six underwriters charged a combined fee of just 0.0002%, equivalent to $98 per bank. Regulators are now investigating whether the issuer pushed underwriters to accept these minimal fees. China Galaxy Securities and Industrial Bank, two winning bidders, have not commented publicly on the probe.
“What we’re seeing is genuine overcapacity in investment-grade bond underwriting,” a Beijing-based banker at a state-owned securities firm told the Financial Times. “The headline fee might look decent, but the final bid is a giveaway.”
These razor-thin fees signal how China’s price wars—already rampant in sectors like electric vehicles and food delivery—have seeped into investment banking. Authorities, including President Xi Jinping, have warned against excessive competition and over-investment in saturated industries, fearing it could drive further deflation in an already fragile economy.
Despite a rebound in issuance volumes—bond deals are up more than 50% so far this year, according to LSEG data—the sheer number of banks chasing limited mandates has made fee compression inevitable. More than 140 mainland banks competed for $1.1 trillion in bond deals in the first half of 2025, with SOEs accounting for over half and financial institutions contributing 30%.
“Corporate credit demand is tepid due to a still challenging business and macro outlook,” said Zerlina Zeng, chief Asia credit strategist at CreditSights. Many private firms and local government financing vehicles are opting for cheaper bank loans rather than issuing bonds, she added.
Underwriters are now bidding at or near zero to win mandates and secure higher spots in league tables—an essential metric for attracting future SOE clients. “If you’re not in the top 10, or even top three, you’re unlikely to be shortlisted,” said a Beijing banker.
The fee war is not limited to debt markets. Initial public offerings (IPOs) have also seen dramatic fee cuts, especially in Hong Kong. Mainland banks such as Citic Securities and CICC have overtaken Goldman Sachs and Morgan Stanley in total deal size this year by offering fees of less than 1%, per LSEG data.
In the largest Hong Kong flotation this year—CATL’s $5 billion secondary listing—lead underwriters booked base fees of just 0.2%, with some bids as low as 0.01%, the Financial Times reported. Even after including discretionary bonuses, the total payout was far below Hong Kong’s average IPO fee of 4.2%.
The top five Hong Kong IPOs of 2025, including Hengrui Pharmaceuticals and Haitian Flavouring & Food, all carried base underwriting fees of less than 1%. Analysts warn that this trend is unlikely to reverse anytime soon.
“Fee compression is a broad trend across securities firms’ business lines,” said Yiran Zhong, an analyst at S&P Global Ratings. “Even if regulators step in, the penalties are often minor and symbolic. Clients still welcome the lowest bids.”
The China Securities Regulatory Commission (CSRC) has expressed concern about “malicious lowballing” but has yet to issue firm measures to curb the practice. With rising competition and few consequences for underpricing, banks appear willing to absorb underwriting losses in the short term in hopes of winning future business or cross-selling other services.
As the battle for mandates intensifies, industry observers worry that long-term profitability and service quality could be compromised—adding another layer of uncertainty to China’s already delicate financial environment.
