China’s financial sector executives face deeper pay cuts as firms heed President Xi’s ‘common prosperity’ push

Proposals on narrowing the compensation gap between senior and junior staff could be submitted to regulators in the next few months, sources say

Capping total pay and deferring incentive bonuses for longer periods are among options being considered

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A Chinese flag in front of buildings in Pudong’s Lujiazui financial district in Shanghai. Chinese bankers face the prospect of deep pay cuts. Photo: Bloomberg

Published: 3:03pm, 15 Nov 2022

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, who asked not to be identified as the information is private. Some may submit proposals to regulators in the next few months, the people said.

Capping total pay and deferring incentive bonuses for longer periods are among options being considered, the people said. In Hong Kong, at least two China-backed investment banks are deliberating how to level pay 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 China’s 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.

Chinese President Xi Jinping addresses the media following the 20th National Congress of the Communist Party of China, at the Great Hall of the People in Beijing, on October 23. Photo: Reuters

Markets have since rebounded after Xi recalibrated his zero-Covid policies to lessen their economic impact, moved to stabilise China’s fraught relationship with the US 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.

Representatives from the Securities Association of China and the Asset Management Association of China (AMAC) did not immediately respond to requests seeking comment.

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