China’s financial elite face $542,000 pay cap, bonus clawbacks

BEIJING - The era of big pay cheques for Chinese financiers is fast coming to an end as some of the industry’s biggest companies impose strict new limits to comply with President Xi Jinping’s “common prosperity” campaign.

The nation’s largest financial conglomerates have asked senior staff to forgo deferred bonuses and in some cases return pay from previous years to comply with a pre-tax cap of 2.9 million yuan (S$542,000), according to people familiar with the matter.

China Merchants Group, China Everbright Group and Citic Group are among state entities that have conveyed the guidance to employees at some of their units in recent weeks, said the people, asking not to be identified discussing a private matter. Some mutual fund managers are also being pressured to return non-compliant pay earned in previous years, the people said.

Vilified by Beijing as “hedonists” over their lavish lifestyles, top-earning finance workers including investment bankers and fund managers have been

among the hardest hit by Mr Xi’s push

for a more equal distribution of wealth.

The US$66 trillion (S$89.7 trillion) financial industry has fallen under tighter Communist Party control, with banks and brokerages slashing pay and other perks.

Several Chinese mutual fund managers proposed capping staff salaries at about three million yuan, people familiar with the matter said in April. It was not clear how many financial entities will be subject to the current guidance, the people added.

At Citic Securities, a unit of Citic Group, all senior executives on its management committee earned well over three million yuan in 2023, with chairman Zhang Youjun making five million yuan, according to its annual report. The majority of their pay was from deferred bonuses.

The move comes as China recently started a new round of anti-graft inspections of some of its largest state lenders, the central bank and key regulators, the first broad probe since the one in 2021 that sent shockwaves through the industry.

At least 130 financial officials and executives were investigated or punished in 2023 alone, according to Bloomberg calculations based on official announcements.

The authorities have put

an increasing focus on corruption

among cadres and corporate executives, at a time when they are trying to stabilise the world’s second-largest economy and prevent systemic financial risks. The proposed caps mark a drastic shift from the era where companies doled out big pay cheques to lure top talent.

China’s economy is struggling to regain momentum

as confidence cratered among domestic consumers and international investors. Banks have been urged to step up lending, but demand is weak for new credit. The real estate market is still in a deep slump and foreign investors have shunned the stock market.
BLOOMBERG