Underwriting fees in China’s bond market have fallen to shockingly low levels—under $100, triggering a regulatory probe into some of the country’s top investment banks. The crackdown comes as authorities try to rein in a worsening price war that’s eroding profit margins and destabilising fair competition.

The National Association of Financial Market Institutional Investors (NAFMII) has launched an investigation into six banks involved in a 35 billion yuan ($4.9 billion) bond deal by China Guangfa Bank, following their ultra-low fee bids, which drew attention. Some underwriters charged as little as 700 yuan ($98) each before tax.

The combined fee rate for the deal was just 0.00018%, significantly lower than the typical 0.01% seen in past transactions. Despite repeated warnings, banks and brokerages continue to underbid in an effort to climb league tables and win future mandates.

Major players, including Guotai Haitong Securities and Citic Securities, are also part of the ongoing investigation. Authorities have stated that any violations will be met with strict action, including possible fundraising bans.

This isn’t the first time lowball pricing has been scrutinised. Previous probes in 2020 and 2019 targeted similarly unsustainable practices. Experts say the intense competition, often described as “involution,” is damaging long-term industry stability. Regulators now aim to guide the market back to rational pricing and healthier competition.

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