Financial reports covering the first half of the year showed that the net capital of the top 20 brokerages reached 44.9 billon yuan (US$5.68 billion), 73 per cent of the industry total.

"A few leading brokerages demonstrated great competitiveness in terms of capital, networks, innovative capabilities and risk-management skills," said Liang Jing, an analyst from Guotai Junan Securities.

Given such intense competition, many brokerages are seeking to boost their capital in order to expand their business. A few brokerages such as Changjiang Securities, Guangfa Securities, China International Capital Co and Everbright Securities have drawn up plans to raise fund through IPOs.

Industry opens up

Brokerages not only face competition from their counterparts, but also from newcomers to the industry, such as lenders, asset management companies and foreign investment banks.

Commercial banks are currently already able to underwrite bonds, financial bills, and commercial bank bonds. Meanwhile, lenders are continually expanding their investment banking departments. With a large amount of customer resources, their competitive advantage is overwhelming.

For example, the Industrial and Commercial Bank of China the nation's biggest lender boasted 2.5 million clients by June 30.

To operate an investment bank in China, foreign firms require a license to underwrite stock and bond sales. They need a separate brokerage license to trade securities. Only Goldman Sachs, French lender BNP Paribas, and CLSA Asia's biggest brokerage currently have underwriting licences, while Goldman Sachs is the only one to possess a brokerage licence.

UBS, the biggest Swiss bank, has purchased 20 per cent of Beijing Securities for US$210 million to gain underwriting and brokerage licenses.

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