China’s investment banks have slashed fees for bond issues to as low as $100 as price-sensitive state-owned issuers dominate a tepid credit market and stoke a race to the bottom to win mandates.

Bankers said the pressure to undercut rivals had become acute this year as state-owned enterprises — which often select underwriters based on deal experience and price — had become the most active bond issuers and private companies, which often issue high-yield debt, pulled back.

China’s bond market regulator, which has expressed concern about unsustainably low fees, this month said it would probe a Rmb35bn ($4.8bn) debt sale over suspicions that the issuer, China Guangfa Bank, pushed underwriters to bid low rates. Six underwriters charged a combined fee of 0.0002 per cent, with China Galaxy Securities and Industrial Bank winning their bids for just $98 each.