Securities brokers in China tend to adjust the revenue structure and focus on innovative business such as asset management, margin financing and securities lending business. Abby Wang, KPMG partner, told People’s Daily Online that the transformation of revenue structure will be one of changes that China’s securities sector face in near future.

China’s brokers have seen a rise in profits after a three year decline, benefitting from a more active stock market, expansion of margin financing, securities lending and asset management growth, according to KPMG’s latest survey of the sector.

The following is the excerpt of People's Daily Online's written interview with Abby Wang after the report was released.

People’s Daily Online: How securities companies should deal with these risks and challenges? How to reduce the damage of risk? And how to improve securities companies’ awareness of risk management? ‪

Abby Wang: As the securities industry continues to grow and become increasingly innovative, securities companies need to further improve their risk governance structure, risk management measures and support systems, and balance business development/innovation and risk control.

People’s Daily Online: Intensified competition among brokers for commissions has significant impact on profitability of traditional broker business, so what changes will China’s securities sector face in near future? ‪

Abby Wang: The first is different strategies for retail and institutional clients: one solution is to cut costs. As a result, more and more brokers are moving their business online and standardizing workflows for retail clients. In addition, more value-added services are required for institutional clients.

Another one is the transformation of revenue structure: brokers tend to adjust their revenue structure and focus on innovative business such as asset management, margin financing and securities lending business. According to the survey, margin financing and securities lending business grew quickly in 2013, contributing 11.59 percent (2012: 4.06 percent) of the securities sector’s total income. As competition between brokers intensifies, this rate is likely to continue increasing.