BEIJING/HONG KONG (Reuters) – China is set to impose a 1 million yuan ($137,309) cap on the annual income of staff at central government-owned financial institutions, three sources said, expanding a crackdown on excesses in against a background of economic slowdown.
Those whose income already exceeds 1 million yuan will have their payment cut, such as middle and senior managers whose income will be as much as halved the compensation structure in 27 financial giants including the “Big Five” banks, six major insurers and four major bad debt managers.
Most of the cuts will be made by reducing bonuses, said two of the three people, who have direct knowledge of the plan but declined to be identified because of the sensitivity of the matter.
The biggest pay-cutting exercise in the $67 trillion finance sector will start as early as next month although staff have yet to be told reasons, the people said.
The cap is in line with the government's “shared prosperity” campaign launched in 2021 to tackle social and income inequality as growth slows in the world's second-largest economy.
Since then private and state-owned financial companies have proactively reduced salaries and bonuses and discouraged people from displaying wealth such as by asking staff to avoid wearing expensive clothes and watches.
However, income caps at state-owned financial institutions could make it harder to retain top talent when private-sector rivals offer competitive compensation packages.
The salary cap at central government-owned financial firms was first reported by Caixin news outlet citing unidentified banking and regulatory sources.
The operating income of subsidiaries of the targeted companies, including investment banks and asset managers, will be capped at 3 million yuan, the three people also said.
Some senior executives at subsidiaries currently earn as much as 5 million yuan, stock exchange filings showed.
Neither the Ministry of Finance – the largest shareholder of the targeted companies – nor the Ministry of Human Resources and Social Security responded to Reuters requests for comment.
WAGE DISORDER
China is also set to cut pay by about half at the central bank and two financial regulators as part of an overhaul that began in 2023 to bring incomes closer to those of other civil servants, people with knowledge of the matter previously told Reuters.
The timing is at odds with the government's efforts to boost consumption in order to revive economic growth. Just this month, millions of government workers got a surprise monthly raise of about 500 yuan on average, beneficiaries told Reuters.