backed financial institutions in China have already placed annual salary caps on their senior executives, the Post has learned, as Beijing pushes forward with a campaign to narrow the wealth gap.
The finance sector has been one of the main targets of China’s “common prosperity” drive, which has seen the industry hit with stricter regulatory supervision, rampant pay cuts and even some lay-offs in the past year.
The Post previously reported that China’s state-backed financial institutions were planning to introduce staff salary caps set at 3 million yuan (then US$412,000) last July. Since then, several organisations have already implemented the policy – with some introducing an even lower cap, according to people familiar with the matter.
Central government-owned financial institutions have set a pay ceiling of just 1 million yuan for senior executives, while their subsidiaries are using the original 3 million yuan limit for them, said one source, who spoke on condition of anonymity.
Securities firms have taken the lead in moving forward with the salary cap, with some also yet to issue staff with their 2023 annual bonuses, another source working for a brokerage firm said.
Large state-owned banks, insurance companies, stock exchanges and regulatory agencies will be the next targets of the campaign, the source said.
Investment banks could face even tighter restrictions. A worker at one of China’s top securities firms said that a new round of pay cuts was expected to be introduced soon, and that it would not be restricted to senior staff. The scale of the salary reductions have yet to be confirmed, according to the source.
The widespread pay cuts spreading through China’s finance sector are not only being driven by regulatory requirements, but also by persistent profitability pressure in the 481 trillion yuan industry amid a wider economic slowdown.
The 1 million yuan pay cap for central government-backed financial institutions was first reported by Chinese financial news outlet Caixin last week. According to the Ministry of Finance, a total of 27 enterprises fit that category, including the sovereign wealth fund China Investment Corporation, three policy banks, China’s “Big Five” banks, and six leading insurers.
Financial regulatory bodies including the People’s Bank of China, National Financial Regulatory Administration and China Securities Regulatory Commission delayed salary payments in January, and will go ahead with long-expected pay cuts in February, according to Caixin.
In China, civil servants working in finance-related positions traditionally earned more than those in other departments. But in March 2023, Xiao Jie, secretary general of the State Council, announced that pay for civil servants in the financial field would be made equal to the general level.
Late last year, Chinese civil servants and workers at public institutions were notified that their basic monthly salaries would be increased by about 500 yuan – a move apparently designed to boost China’s sluggish domestic consumption.
However, many staff noted that the tiny increase would not make up for the recent cuts to their bonuses and allowances, which used to account for a much larger share of their overall pay packages than their base salaries.