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China’s financial elite faces $400,000 salary cap, bonus recovery
(Bloomberg) — The era of big paychecks for Chinese financiers is quickly coming to an end as some of the industry’s biggest companies impose strict new limits to fulfill President Xi Jinping’s “common prosperity” campaign.
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The country’s biggest financial conglomerates have asked senior employees to forgo deferred bonuses and, in some cases, return payments from previous years to meet a pre-tax threshold of 2.9 million yuan ($400,000), according to people familiar with the matter. with the subject.
China Merchants Group, China Everbright Group and Citic Group Corp. are among the state entities that have conveyed the guidance to employees at some of their facilities in recent weeks, the people said, asking not to be identified discussing a private matter. Some mutual fund managers are also being pressured to return noncompliant payments received in previous years, the people said.
Vilified by Beijing as “hedonists” for their lavish lifestyles, the highest-paid financial workers, including investment bankers and fund managers, are among those hardest hit by Xi’s push for a more equal distribution of wealth. The $66 trillion financial industry has fallen under tighter Communist Party control, with banks and brokerages cutting salaries and other perks.
Several Chinese mutual fund managers have proposed capping employee salaries at about 3 million yuan, people familiar with the matter said in April. It was unclear how many financial entities would be subject to the current guidance, the people added.
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 earning 5 million yuan, according to its annual report . Most of his pay came from deferred bonuses.
Representatives for Citic Group, Merchants Group and Everbright Group did not respond to requests for comment.
The move comes as China recently began a new round of anti-corruption inspections of some of its biggest state-owned lenders, the central bank and top regulators, the first wide-ranging probe since the 2021 one that sent shockwaves through the industry. .
At least 130 financial officials and executives were investigated or punished in 2023 alone, according to Bloomberg calculations based on official announcements.
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Authorities have been placing increasing focus on corruption among corporate executives as they try to stabilize the world’s second-largest economy and prevent systemic financial risks. The proposed limits mark a sharp shift from the era when companies handed out big paychecks to attract top talent.
President Xi will gather senior officials from July 15 to 18 for a postponed conclave that is expected to set long-term policy on a wide range of economic and political issues, the official Xinhua News Agency reported after the Politburo wrapped up a meeting on Thursday. That meeting stressed that party leadership must be at the center of any reform and called for proper handling of the relationships between economy and society, government and market, development and security.
China’s economy is struggling to regain dynamism as confidence disintegrates between domestic consumers and international investors. Banks have been urged to step up lending, but demand for new credit is weak. The property market is still in a deep recession and foreign investors have avoided the stock market.
(Updates on China main meeting in eleventh paragraph.)
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