This paper investigates how underwriters set the IPO firm’s issuance price in China. This paper details the complete processes of setting issuance price of IPO firm’s equity by underwriters. The paper investigates how fair value estimate is subsequently used as a basis for IPO pricing. The pricing process of underwriters is divided into three subprocesses: deliberate price discount, price update, and underpricing. This paper documents that underwriters deliberately discount the fair value estimate when setting the preliminary offer price. Part of the intentional price discount can be recovered by higher price updates. When controlling for other factors such as investor demand, part of the underpricing stems from this intentional price discount.