China Securities Profit Model Analysis

The securities companies in China were established during the duo economysystem-planned economy and state-owned economy. At the beginning, they wentthrough and secured under the planned economy and with the changes of market andindustry policies, they start to make tiny profit. The slump in secondary market in2001 caused a great loss to the securities companies who severely rely on thebrokerage income. Only in 2004, the total operating income of 114 securitiescompanies was RMB16.9bln, lost RMB16.7bln, and the pattern of profiting becameeveryone's focus. Along with the revised laws such as "Law of Securities" and "Lawof Corporation" and the issuance of new rules and with the reforms in equity divisionand issuance of financing business and the development of stock transferring andquote system in securities companies, the issues exists in the fundamental marketconstruction and the systematic obstacles such as the equity division, unilateralmarket and single market structure against the development of securities businesswere already or will be resolved thoroughly so thus securities market has changedultimately.But the survival of securities companies and boosting the competitiveness arestill the core issues concerning the long, sustained, and sound development ofsecurities market. At the moment of turning point, the securities business mustconsider and research the ways concerning the pattern of operation and development.Currently there are many malpractices in the patterns of profiting, mainly cored bychannel, taken monopolized profit as the pattern of profiting with severe homogenizedcompetition, highly rely on the brokerage income, singleness of the business and lackof competitiveness and risk resistance.The securities business in our country should transfer its pattern of channel profitmaking into the pattern of profiting with the emphasis on the service. After thetransfer, the concept, regulation, product, profit structure and risk and income divisionsystem of the securities will also change; it also needs to develop and innovate thebusiness with the emphasis on brokerage and investment banking, control and managethe risk in its own and customer's assets, customize and orient its business. Thehomogenized management and channeled service in the past now has been changedinto a diversified and comprehensive operation; it also has changed its business withthe original emphasis on listing and internal service into the public market; with thecontinuous development of internal controlling system, it needs to research anddevelop variable and different leveled products in order to meet with the differentneeds and form its own special competitiveness and strengthen its risk resistance.