Image: Reuters Berita 24 English - Eight people who know about the situation said that China 's well-paid financial dealmakers are getti...
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| Image: Reuters |
Berita 24 English - Eight people who know about the situation said that China's well-paid financial dealmakers are getting a crash course in austerity in the form of pay cuts and fewer perks. This is because their state-owned employers are responding to Beijing's push for "common prosperity" by cutting pay and limiting perks.
Four of the people said that this year, state-owned investment banks like China International Capital Corp (CICC) and Citic Securities cut their employees' pay and put off giving them their bonuses. They said that the cuts could be as much as 60% in some cases.
Two other people with knowledge of the situation told Reuters that some companies, like the state-owned China Merchants Securities, have cut travel and entertainment allowances since the beginning of the year.
"Putting a limit on the salaries of people in the financial industry is in line with the general trend, and it's also part of the push for common prosperity," said Xia Chun, chief economist at Hong Kong wealth manager Yintech Investment Holdings.
Even though China's economy was slowing, the financial sector was still one of the best places for professionals to work. This was because regulatory crackdowns in two other high-paying industries, technology and real estate, had led to job losses.
Last year, investment bankers in China started getting less money because the economy was slowing down and business was slowing down with it. This year, though, industry watchers say the trend is getting stronger because of the "common prosperity" drive. At a time when Western investment banks are growing in China, this could make it harder to keep good employees.
China's securities industry association told the country's brokerages in May to set up a good compensation system and warned that excessive or short-term incentives could lead to compliance risks. This made the trend of cutting salaries even stronger.
President Xi Jinping's renewed push for "common prosperity" started last year as a way to reduce income inequality, which threatens long-term economic growth and even the legitimacy of Communist Party rule. This is what set off the protests.
Even though the government's talk about "common prosperity" may have slowed down a bit in recent months because of the slowing economy, sources say that banks and other financial companies are still putting pressure on benefits and pay.
Investment bankers are going to have a "thorough check on pay," with a focus on pay that makes headlines, said a senior executive at a state-owned investment bank, who did not want to be identified because the topic is sensitive.
The executive said that "common prosperity" was no longer just a concern for central government-owned financial firms, but had spread to state investment banks and become the "guiding spirit" for pay talks this year.
All of the people who knew about the changes in pay at investment banks did not want to be named because they were not allowed to talk to the media.
Reuters asked CICC and Citic for comments, but they did not answer.
In an email statement, China Merchants said, "COVID-19 and other factors led to a big drop in business trips across the industry, and the company's travel costs have gone down as a result."
ECONOMY CLASS
The pay packages of senior management and board members at 13 of China's 30 highest-paying investment banks went down in 2021 compared to the year before, according to bank filings gathered by Reuters, which are the most recent data we have.
This year, that number is likely to go up as more companies join the "common prosperity" drive.
Industry sources say that a senior investment banker in China could make between 3 and 10 million yuan ($445,000 and $1.48 million) a year in total pay, not including stock incentives.
A senior equity sales executive at a state-owned investment bank in Shanghai said that his pay was cut last year, even though the bank's profits went up by more than 25% in the same time period. The banker refused to say more.
He said that the two highest-paid managers at his company, who would earn more than 10 million yuan each in 2021, seemed to have volunteered to take a pay cut, though that could have been forced on them because of the attention paid to high flyers.
The executive also said that his boss told staff verbally in January not to post photos on social media that show a lavish lifestyle. This was because a junior analyst at a rival firm got criticised for posting her annual pay slip, which said she made 2.24 million yuan.
In 2021, a professional in Shanghai who wasn't in the finance industry made an average of 78,000 yuan a year, according to data from the municipal government.
Along with pay and bonuses, the finance industry has also cut back on perks.
An internal CICC memo from April, which Reuters saw, said that starting May 1, all staff can only fly economy, both domestically and internationally. Before, its managing directors and executive directors could fly for business in the United States and other countries.
CICC didn't say anything about the memo.
($1 = 6.7462 Chinese yuan renminbi)
