Crackdown on Cut-Throat Competition: China's New Bond Underwriting Rules

China's interbank market regulator has introduced new guidelines for bond underwriters, mandating that they refrain from competing by offering below-cost fees. This move is part of Beijing's broader campaign to combat cut-throat price wars, now extending to the financial sector.

Authorities in China have pledged to address disorderly competition, a measure that adds to the 'anti-involution' drive targeting industries like steel, automotive, and coal. As per the National Association of Financial Market Institutional Investors (NAFMII), lead bond underwriters are prohibited from bidding with fees lower than actual costs.

The NAFMII notice emphasizes the need for maintaining good market order, coming in the wake of a probe into leading underwriters for suspected low-fee practices. Additionally, the guidelines call for improved information disclosure and adherence to market principles in pricing new issues, effective August 11.

(With inputs from agencies.)