BEIJING/HONG KONG (Reuters) – China will impose a limit of 1 million yuan ($137,309) on the annual income of staff at central government-owned financial institutions, three sources said, expanding a campaign against excesses against a backdrop of economic slowdown. .
Those whose income already exceeds 1 million yuan will see their pay reduced, such as middle and senior managers, whose income will be cut by up to half in an overhaul of the compensation structure at 27 financial giants, including the “big five” banks, six leading insurers and four large bad debt managers.
Most of the cuts will be made through reduced bonuses, said two of the three people, who have direct knowledge of the plan but did not want to be identified because of the sensitivity of the matter.
The most radical pay-cutting exercise in the $67 trillion financial sector will begin next month, although staff have not yet been informed of the reasons, the people said.
The limit is in line with the government’s “common prosperity” campaign launched in 2021 to address social and income inequality as growth slowed in the world’s second-largest economy.
Since then, both state-owned and private financial companies have proactively reduced salaries and bonuses and discouraged the display of wealth, asking staff to avoid wearing expensive clothes and watches.
However, income limits at state financial institutions could make it difficult to retain top talent when private sector rivals offer competitive compensation packages.
The salary cap at central government-owned financial companies was first reported by news outlet Caixin citing unnamed banking and regulatory sources.
The income of executives at subsidiaries of the targeted companies, including investment banks and asset managers, will be capped at 3 million yuan, the three people also said.
Some top executives of affiliates currently earn up to 5 million yuan, stock exchange filings showed.
The Ministry of Finance – the largest shareholder of the targeted companies – and the Ministry of Human Resources and Social Security did not respond to Reuters requests for comment.
SALARY DISPARITY
China is also set to cut salaries by about half at the central bank and two financial regulators as part of a revamp that began in 2023 to bring incomes closer to those of other public officials, people with knowledge of the matter previously told Reuters.
The timing does not coincide with the government’s efforts to boost consumption to revive economic growth. This month alone, millions of government workers received a surprise monthly raise of about 500 yuan on average, recipients told Reuters.