This report does not constitute a rating action. China aims to disrupt the global brokerage industry. The government is using a top-down approach to try to strengthen home-grown champions and nurture two or three world-beating brokerages by 2035. Can it do so? Maybe. Eventually. Tighter regulation and improved liquidity backstops are emerging as brokerages grow in systemic relevance. Through their introduction, the government aims to manage systemwide risk through prudential oversight. These factors are somewhat positive for the industry. Still, benefits should not be overstated: We expect them to reach selected institutions incrementally. Government-led guidance in China is influencing the direction of the brokerage industry by driving sector consolidation and overseas expansion. It could eventually alleviate the sector's intense competitiveness
