In a significant shift for China’s financial sector, some of the nation’s largest financial conglomerates are implementing strict salary limits to align with President Xi Jinping’s “common prosperity” campaign.
This move marks a dramatic departure from the era of substantial paychecks that has characterized the industry for years.
Senior staff at major state entities, including China Merchants Group, China Everbright Group, and Citic Group Corp., have been directed to forgo deferred bonuses and, in some cases, return pay from previous years.
These measures are designed to ensure compliance with a new pre-tax salary cap of 2.9 million yuan ($400,000), according to sources familiar with the matter.
The financial sector, valued at $66 trillion, has come under tighter Communist Party control. Investment bankers and fund managers, previously known for their lavish lifestyles, are now facing substantial pay cuts as part of Xi’s push for a more equitable distribution of wealth.
“The era of big paychecks for Chinese financiers is rapidly coming to an end,” commented one industry insider who requested anonymity. “The government is serious about enforcing these new limits.”
Reports indicate that several Chinese mutual fund managers had already proposed capping staff salaries at around 3 million yuan.
It remains unclear how many financial entities will ultimately be affected by the current guidance. At Citic Securities Co., a unit of Citic Group, all senior executives on its management committee earned well over 3 million yuan last year, with Chairman Zhang Youjun making 5 million yuan.
The bulk of their compensation came from deferred bonuses, which are now being scrutinized.
Representatives from Citic Group, Merchants Group, and Everbright Group have not responded to requests for comment.
This move comes amidst a fresh round of anti-graft inspections targeting some of China’s largest state lenders, the central bank, and key regulators. This is the first comprehensive probe since 2021, which sent shockwaves through the industry.
Bloomberg calculations show that at least 130 financial officials and executives were investigated or punished in 2023 alone, highlighting the government’s intensified focus on corruption within the sector.
As China’s economy struggles to regain momentum, banks have been urged to increase lending to stimulate growth.
However, demand for new credit remains weak, the real estate market is in a slump, and foreign investors are shying away from the stock market.
“The proposed caps represent a drastic shift from the days when companies offered big paychecks to attract top talent,” said another source familiar with the matter. “It’s clear that the government is taking a more hands-on approach to managing the economy and addressing income inequality.”
With confidence among domestic consumers and international investors at a low, and the financial sector facing increased scrutiny and regulation, the era of substantial compensation packages for Chinese financiers appears to be firmly in the past.
