The era of big pay for Chinese financiers is coming to an end as some of the sector’s biggest companies impose tough new limits to comply with President Xi Jinping’s “common prosperity” campaign.
The country’s largest financial conglomerates have asked their senior executives to forgo deferred bonuses and, in some cases, return salaries from previous years in order to meet a pre-tax cap of 2.9 million yuan ($400,000) , according to sources close to the matter.
China Merchants Group, China Everbright Group and Citic Group Corp. are among the public entities that have issued these guidelines to employees in some of their units in recent weeks, the sources said, asking not to be identified discussing a private matter. Some mutual fund managers are also under pressure to return non-compliant salaries earned in previous years, the sources said.
Vilified by Beijing as “hedonists” for their lavish lifestyles, the highest-paid finance workers, including investment bankers and fund managers, have been among the hardest hit by Xi’s pressures in favor of a more equitable distribution of wealth. The $66 trillion financial sector has fallen under stricter Communist Party control, with banks and brokerages cutting salaries and other benefits.
Several Chinese mutual fund managers have proposed capping staff salaries at around 3 million yuan, according to people familiar with the matter. said in April. It is unclear how many financial entities will be subject to the current guidelines, the sources added.
At Citic Securities Co., a unit of Citic Group, all senior executives on its management committee earned well over 3 million yuan last year, with Chairman Zhang Youjun earning 5 million yuan, according to his Annual Report. The majority of their salary came from deferred bonuses.
Representatives for Citic Group, Merchants Group and Everbright Group did not respond to requests for comment.
The move comes as China recently launched a new round of anti-corruption inspections of some of its biggest state-owned lenders, the central bank and top regulators, the first broad probe since one in 2021 that sparked a shock wave in the sector.
At least 130 financial officials and executives have been investigated or sanctioned in 2023 alone, according to Bloomberg calculations based on official announcements.
Authorities are increasingly focusing on corruption among executives and business leaders as they try to stabilize the world’s second-largest economy and prevent systemic financial risks. The proposed caps mark a sea change from the days when companies handed out big salaries to attract top talent.
President Xi will convene top officials July 15-18 for a delayed conclave that is expected to set long-term policy on a wide range of economic and political issues, according to the official Xinhua news agency. reported after the Politburo finished a meeting on Thursday. This meeting stressed that the party leadership should be at the center of any reform and called for proper management of the relationship between economy and society, government and market, development and security.
China’s economy has struggled to regain momentum as confidence has collapsed among domestic consumers and international investors. Banks have been asked to increase lending, but demand for new credit is weak. The real estate market is still in a deep recession and foreign investors have shunned the stock market.
