China Great Wall Securities Co.,Ltd. reported a notably disappointing first half of 2026, contrasting sharply with the broader recovery seen across the securities industry. According to the interim report, the company posted total operating revenue of RMB 2.844 billion, a year-on-year decline of 0.53%, and net profit attributable to shareholders of RMB 1.394 billion, up only 0.69%. This marks a dramatic slowdown compared to the impressive 91.92% jump in net profit recorded during the first half of 2025.

The company's business segments showed clear divergence during this period. While wealth management revenue grew 29.21% year-on-year to RMB 1.553 billion, securities investment and trading revenue slumped 28.49% to RMB 1.125 billion, and investment banking revenue declined 21.16% to just RMB 111 million. These figures reveal that gains from wealth management were largely negated by the sharp contraction in proprietary trading operations.

More troubling than the operational pressures are the accumulating compliance and governance risks. In recent years, China Great Wall Securities Co.,Ltd. has been ensnared in major financial fraud cases involving companies such as特发信息 and越博动力, prompting market scrutiny of its due diligence and continuous supervision capabilities in investment banking. In July 2026, the company's WeChat mini-program was also publicly flagged by authorities for personal information protection violations. Meanwhile, major shareholder Shenzhen Xinjiangnan reduced its stake by approximately 49.74 million shares between June and August, cashing out around RMB 420 million.

With old investment banking risks still unresolved and new compliance issues emerging, with both proprietary trading and investment banking under pressure, and with a major shareholder reducing its position, Chairman Wang Jun and President Zhou Zhongshan face challenges far beyond slowing profit growth. The company must now contend with a multifaceted test involving risk control, compliance, corporate governance, and market confidence.

Proprietary trading income plunges nearly 30%, offsetting gains from wealth management

The five major business divisions at China Great Wall Securities Co.,Ltd. demonstrated significant divergence in the first half of 2026. Wealth management revenue rose to RMB 1.553 billion, up 29.21% year-on-year, while asset management revenue grew 6.07% to RMB 36.17 million. In contrast, investment banking revenue slid to just RMB 111 million, down 21.16%, and securities investment and trading revenue fell sharply by 28.49% to RMB 1.125 billion.

Securities investment and trading now accounts for approximately 39.6% of total revenue, making it the second-largest income source behind wealth management. The company's combined investment income and fair value changes reached RMB 1.697 billion, yet still declined 17.81% year-on-year. In the interim report, the company stated that equity investments continue to employ a three-tier allocation strategy featuring index ETFs, sector ETFs, and select individual stocks, noting that its high-dividend strategy has outperformed benchmark indices while maintaining both resilience and growth potential.

Despite these claims, the near-30% drop in securities investment and trading revenue is undeniable. This raises concerns not merely about a single failed investment but about the fundamental sensitivity of China Great Wall Securities Co.,Ltd.'s earnings structure. When markets perform well, proprietary trading amplifies profits rapidly; when market conditions shift, it can equally become a drag on earnings growth. With proprietary trading representing close to 40% of business, profit volatility remains highly exposed to asset price fluctuations.

Investment banking continues to struggle as well. Revenue for this segment was just RMB 111 million, down 21.16%, while operating margins contracted by 7.76 percentage points to 20.55% compared to the same period last year. The simultaneous weakness in both investment banking and proprietary trading, despite significant growth in wealth management, highlights increasing problems with the company's business balance.

Notably, the standout performers were the two fund management companies in which China Great Wall Securities Co.,Ltd. holds stakes. Invesco Great Wall Fund Management reported revenue of RMB 2.418 billion, up 41.41%, with net profit of RMB 807 million, up 48.89%, achieving total managed assets exceeding RMB 1.11 trillion. China Great Wall Fund Management posted revenue of RMB 669 million, up 23.72%, with net profit of RMB 166 million, up 22.13%. The rapid growth of both fund companies provides a striking contrast to the stagnant earnings at the parent securities firm.

Legacy issues from previous leadership: two fraud cases continue to test risk control standards

Beyond profit fluctuations in the interim report, the most intractable problems for China Great Wall Securities Co.,Ltd. stem from historical compliance issues that refuse to dissipate. The market remains focused on two major financial fraud cases involving特发信息 and越博动力.

The company had long participated in capital operations and continuous supervision for特发信息. Regulatory investigations revealed that a subsidiary of特发信息 engaged in financial fraud through fabricated transactions and cross-period cost adjustments, resulting in multiple years of false statements in annual reports. On the other front, China Great Wall Securities Co.,Ltd. served as the sponsor for越博动力's IPO, only for the company to later be found to have inflated revenue and profits while concealing connected transactions, ultimately leading to its delisting.

During the earlier IPO process for越博动力, the company had already faced regulatory measures for deficiencies in due diligence and risk disclosure. These two projects exposing significant problems is no small matter for any securities firm. As sponsors, they bear the "gatekeeper" responsibility to thoroughly verify the financial authenticity, business sustainability, and major risks of issuers. When multiple key projects cumulatively reveal serious fraud issues, even if not all liability can be attributed to the sponsor, market participants inevitably question the firm's capabilities in project selection, due diligence, internal review, and continuous supervision.

The timing compounds the controversy: both cases' risk developments coincided significantly with the tenure of former president Li Xiang. In July 2025, Li Xiang resigned citing "personal reasons" after approximately 30 years at China Great Wall Securities Co.,Ltd., including many years as president. Following an interim period, Zhou Zhongshan officially assumed the role in January 2026. Given the proximity between his departure and the continued escalation of historical risk events, market speculation arose questioning whether the predecessor had exited early and left historical baggage for the successor.

Undeniably, however, the legacy issues ultimately landed on the new management's desk. Zhou Zhongshan joined the company in 1998 and worked across multiple core positions including branch operations, regional offices, retail brokerage, and strategic management. As a typical internally cultivated executive, he maintains solid familiarity with the company's business operations, risk projects, and internal governance mechanisms.

The two fraud cases expose not merely isolated team or project issues but potentially systemic weaknesses across project sourcing, due diligence, quality control, internal review, compliance checks, and continuous supervision. If only personnel changes occur without substantive transformation in risk control logic and internal accountability mechanisms, the leadership transition alone cannot fundamentally resolve these issues.

APP violates two personal information red lines, exposing compliance gaps anew

While the特发信息 and越博动力 cases exposed historical risk control failures in investment banking, the personal information protection issues that emerged in 2026 demonstrate that compliance pressures have not subsided following the management change. In July 2026, China's National Computer Virus Emergency Response Center released inspection findings on mobile applications involving illegal or excessive collection and use of personal information. As part of the 2026 special campaign on personal information protection, authorities tested a range of mobile apps and singled out the WeChat mini-program of China Great Wall Securities Co.,Ltd.

The official findings indicate this was not merely a minor technical defect but involved two distinct violations of personal information protection requirements. First, during initial operation scenarios, the company failed to fulfill its obligation to inform users about personal information processing in a prominent and clear manner as required. Second, it failed to provide users with convenient methods to withdraw consent for personal information collection.

This issue is compounded by an earlier incident on July 23, 2018, when the company's centralized trading system experienced a partial outage lasting 10 minutes. Due to deficiencies in information security management and incident response, the company received both a warning letter from the Shenzhen Regulatory Bureau and an oral warning notice from the Shenzhen Stock Exchange.

For a licensed securities firm, these issues cannot simply be dismissed as ordinary "bugs" in internet products. Securities brokerage apps and mini-programs continuously handle highly sensitive financial information including customer identities, account details, capital data, and trading behavior. Securities companies should be held to even stricter information security and personal data protection standards than ordinary internet platforms. In an era of intensified regulatory focus on data governance, cybersecurity, and investor rights protection across the financial sector, personal information compliance is no longer merely an "experience enhancement" but an unambiguous regulatory red line.

Major shareholder continues reducing stake, market casts a "cautionary vote"

Beyond compliance incidents, another noteworthy signal from the capital markets concerns the persistent stake reductions by a significant shareholder. Between June and August 2026, Shenzhen Xinjiangnan, a shareholder holding more than 5% of China Great Wall Securities Co.,Ltd., cumulatively reduced its position by approximately 49.74 million shares at an average price of RMB 8.45 per share, realizing about RMB 420 million. Following these sales, its stake declined further from above 12%.

The company's disclosure cites business development and capital requirements as the reason for the reduction. However, capital markets look beyond standard statements in official announcements and pay close attention to the signals conveyed by shareholder actions. Particularly telling is when a shareholder holding more than 10% chooses to cut its stake significantly even after the company reported substantial profit growth and improved operating metrics in 2025. Such actions inevitably trigger speculation about the shareholder's long-term holding intentions and the company's future growth prospects.

When a listed securities firm simultaneously faces reputational damage in investment banking, greater volatility in proprietary trading, APP compliance issues, and stake reductions by major shareholders, the market typically applies a higher risk discount. Even with profitable financial statements, investor concerns over corporate governance, risk control quality, and long-term growth certainty may prevent the stock price from fully reflecting short-term earnings improvements.

Legacy issues persist; the true test for new leadership is just beginning

Zhou Zhongshan did not inherit a simple narrative of a "high-growth securities firm." Six months into his tenure, the new management confronts not improvement but increasingly complex and intertwined challenges: unresolved compliance risk exposure from past investment banking projects, newly exposed internal control weaknesses through information security gaps, significantly declining proprietary trading revenue, and continued stake reductions by major shareholders adding uncertainty to already difficult circumstances.

As an internally promoted president, Zhou Zhongshan's deep familiarity with the company's business is an advantage, yet he cannot entirely attribute all historical problems to "legacy issues from predecessors." The past risk trajectories, deficient systems, and operational vulnerabilities are arguably clearer to internally grown management than to externally appointed leaders. Consequently, the true measure of his succession will not be the high-profit financial statements of 2026, but whether he can achieve fundamental and thorough remediation of the company's risk control, investment banking, and compliance systems.

If historical risks are merely masked by profit growth without complete rectification, a deteriorating market environment or subsequent regulatory penalties could cause these legacy issues to resurface, eroding both earnings and valuation. Under the combined tests of sponsor practice standards, personal information protection, internal governance, and shareholder confidence, the new management must demonstrate far more than profitability 鈥?it must prove the ability to uphold the bottom line expected of capital market participants.

Data source: corporate announcements.