China is ordering a cap on wages at state-owned financial companies, sources say

BEIJING/HONG KONG (Reuters) – China will impose a cap of 1 million yuan ($137,309) on the annual income of employees at central government-owned financial institutions, three sources said, expanding a campaign against increases against the backdrop of an economic slowdown. .

Those whose income already exceeds 1 million yuan will have their payments reduced, such as middle and senior managers whose income will be cut by half in a comprehensive overhaul of the compensation structure at 27 financial giants including the “Big Five” banks, six leading insurance companies and corporates. Four major bad debt managers.

Two of the three people, who have direct knowledge of the plan but declined to be identified due to the sensitivity of the matter, said the bulk of the cuts would be made by reducing bonuses.

The sources said that the largest wage cut in the $67 trillion financial sector will begin early next month, although employees have not yet been informed of the reasons.

The limit is in line with the “Shared Prosperity” campaign launched by the government in 2021 to address social and income inequality as growth slows in the world’s second-largest economy.

Since then, both state-owned and private financial companies have proactively reduced salaries and bonuses and discouraged displays of wealth, such as requiring employees to avoid wearing expensive clothes and watches.

However, income caps at state-owned financial institutions may make it difficult to retain top talent when private sector competitors offer competitive compensation packages.

The wage cap at central government-owned financial companies was first reported by news outlet Caixin citing unidentified regulatory and banking sources.

The three people also said executive income at subsidiaries of the target companies, including investment banks and asset managers, would be capped at 3 million yuan.

Some top executives at subsidiaries are currently receiving as much as 5 million yuan, stock exchange filings showed.

The Ministry of Finance – the largest shareholder in the targeted companies – and the Ministry of Human Resources and Social Security did not respond to Reuters’ requests for comment.

Wage disparity

China is also set to cut wages by about half at its central bank and two financial regulators as part of a revamp starting in 2023 to bring income closer to that of other civil servants, people familiar with the matter previously told Reuters.

The timing conflicts with government efforts to boost consumption to revive economic growth. Just this month, millions of government employees received a surprise monthly raise of about 500 yuan on average, beneficiaries told Reuters.

The story continues