China’s financial elite faces $400,000 pre-tax salary cap and bonus clawbacks
At least 130 financial officers and executives have been investigated or disciplined in 2023 alone, according to Bloomberg calculations based on official announcements. Image: Shutterstock
By Bloomberg News
The era of high wages for Chinese financiers is quickly coming to an end as some of the sector’s biggest companies impose strict new limits to comply with President Xi Jinping’s “common prosperity” campaign.
According to insiders, the country’s largest financial conglomerates have asked their senior employees to forego deferred bonuses and in some cases return previous years’ salaries to meet the pre-tax cap of 2.9 million yuan ($400,000). ).
China Merchants Group, China Everbright Group and Citic Group Corp. are among the state entities that have passed on the directives to employees of some of their units in recent weeks, said the sources, who asked not to be named as the matter is private. Some mutual fund managers are also being pressured to return non-compliant payments earned in previous years, the sources said.
Branded “hedonists” by Beijing for their lavish lifestyles, the highest-earning financial workers, including investment bankers and fund managers, have been among the hardest hit by Xi’s push for a more equal distribution of wealth. The $66 trillion financial sector has come under tighter Communist Party scrutiny, with banks and brokerages cutting wages and benefits.
Several Chinese investment fund managers proposed capping staff salaries at around 3 million yuan, sources familiar with the matter said in April. It was not clear how many financial entities would be covered by the current guidelines, the sources added.
At Citic Securities Co., part of Citic Group, all senior executives on the management committee earned more than 3 million yuan last year, with Chairman Zhang Youjun earning 5 million yuan, according to the annual report. Most of their salaries came from deferred bonuses.
Representatives from Citic Group, Merchants Group and Everbright Group did not respond to requests for comment.
The move follows a new round of anti-corruption inspections that China recently launched at some of its largest state-owned banks, the central bank and key regulators. It is the first broad survey since the 2021 survey that sent shockwaves through the sector.
At least 130 financial officers and executives have been investigated or disciplined in 2023 alone, according to Bloomberg calculations based on official announcements.
Authorities are increasingly targeting corruption among executives and business leaders as they seek to stabilize the world’s second-largest economy and prevent systemic financial risks. The proposed caps mark a dramatic shift from the era when companies doled out big salaries to lure top talent.
President Xi will convene senior officials from July 15 to 18 for a postponed conclave expected to determine long-term policies on a wide range of economic and political issues, the official Xinhua News Agency reported after the Politburo wrapped up a meeting on Thursday. That meeting emphasized that the party’s leadership must be at the center of any reform, and called for proper handling of the relations between economy and society, government and market, development and security.
China’s economy is struggling to regain momentum as confidence among domestic consumers and international investors has plummeted. Banks have been urged to increase lending, but demand for new credit is weak. The real estate market is still in a deep slump and foreign investors have avoided the stock market.
First print: June 27, 2024 | 11:49 PM IST