Analysis of the Profit Model of Chinese Securities Companies
The importance of the profit model for businesses is unquestionable; generating profits is the objective and responsibility of the enterprise. Therefore, the profit model is the enterprise's business structure, which has evolved through market competition and is dependent on making profits. Particularly for business, it implies the specific operation mode of investing less and earning more.
The profit model of Chinese securities companies has great peculiarities. This is due to the following factors:
- The Chinese securities industry is relatively new compared to ordinary Chinese industries.
The "strong regulation" regime of the Chinese securities sector has created a monopoly situation for securities companies.
- With increasing competition, securities companies will continue to consolidate or restructure, and their division based on different profit models is becoming visible.
Securities companies are required to move from an opportunity-oriented model to a strategy-oriented model so that the position of the profit model will appear more clearly, with more intensive attempts or explorations for that model. Overall, profit models of securities companies are becoming differentiated.
Research for the profit model in Chinese securities companies helps to make policy, flourish the industry, and boost securities companies to grow and build their core competitiveness.
Over the past two decades, Chinese securities companies have been improving as China's capital market has developed rapidly. However, a number of institutional reforms, including the introduction of the customer margin system, share price index futures, and securities margin trading, have not allowed the profit model of Chinese securities companies to transform significantly. Despite changes in revenue and profit structures, the profit model of securities companies has always generally been the "channel" model, with the added features of quasi-banking and "similarity." All of this has made Chinese brokerages face the embarrassment that services offered are a mix of strong and weak, and that the capacity of securities companies to offering services is at a low level overall.
In terms of the historical record of brokerage, their future profit models may be diverging. The regional medium and small brokerages will make impressive strides in upgrading traditional business and innovating new business. However, several major companies will be on their way to internalization based on nationwide operation in China's future. In terms of business, however, the profit model will transform from the channel mode to the service mode, innovating traditional business and expanding innovative business.