China bankers face deeper pay cuts in ‘common prosperity’ push
Senior executives across China’s US$58 trillion financial system are facing additional pay cuts as firms from investment banks to mutual funds weigh options to comply with President Xi Jinping’s “common prosperity” drive.
At least four of the biggest state-controlled securities firms and asset managers are drafting plans to narrow the compensation gap between senior and junior staff, according to people familiar with the matter.
Some may submit proposals to regulators in the next few months, the sources said.
Capping total pay and deferring incentive bonuses for longer periods are among options being considered, the sources said.
In Hong Kong, at least two China-backed investment banks are deliberating how to level pay not only among different ranks but also between their onshore and offshore units, the people added.
Compensation levels in Hong Kong have traditionally been significantly higher than in mainland China.
The moves come on the heels of the Communist Party Congress, where Xi stressed his common prosperity campaign while further consolidating power.
Xi’s pledge to create a “well-regulated” system of wealth accumulation has fuelled intense speculation over how policymakers might achieve that goal, contributing to a deep sell-off in Chinese assets last month.
Markets have since rebounded after Xi recalibrated his zero-Covid-19 policies to lessen their economic impact, moved to stabilize China’s fraught relationship with the United States and rolled out a sweeping package of support measures for the beleaguered property sector.
With financial sector pay representing a small slice of the overall common prosperity push, the government’s broader plans for that campaign remain unclear.
The latest push on pay at securities firms and fund managers follows a spate of measures to limit compensation at state-owned banks and insurers earlier this year.
The campaign has also added to challenges for some Wall Street banks, which are trying to beef up their China businesses after winning regulatory approval to take full control of the units in recent years.
China’s Ministry of Finance in August told state-run banks, insurers and the nation’s sovereign wealth fund to further curb executive pay, with base salaries for senior executives capped at 35 percent of their total package, and more than 40 percent of bonuses deferred for at least three years.
Asset Management Association of China in June asked fund houses to set up a “reasonable” pay structure and avoid excessive rewards, following similar guidance for brokerages from the securities association in May.
Earlier in the year, Chinese regulators told banks to report details on how they compensate their top bankers.
Under the common prosperity campaign, Xi’s administration has launched a sweeping crackdown on the private sector to rein in “disorderly expansion of capital”.
The efforts coincide with an ongoing anti-graft crackdown in the finance industry, which has ensnared dozens of officials since its inception in 2021.
China announced earlier this month an investigation into deputy central bank governor Fan Yifei, the highest-ranking official to be targeted in the latest round.