© Reuters. FILE PHOTO: People wearing face masks ride an escalator past office towers in the Lujiazui financial district of Shanghai, China October 17, 2022. REUTERS/Aly Song/File Photo
By Xie Yu, Ziyi Tang and Julie Zhu
HONG KONG (Reuters) – From cutting salaries and bonuses and asking staff not to wear expensive clothes and watches at work, to reining in travel and entertainment expenses, Chinese financial firms have jumped on an austerity drive as Beijing pushes to bridge the wealth gap.
The steps come as authorities vow to clamp down on corruption in the country’s $57 trillion financial sector and as growth in the world’s second-largest economy weakens, with youth unemployment hitting a record high.
Financial professionals are among the highest-paid workers in communist China and their wealth and flashy lifestyles have often come under criticism from the public on social media as the economy slows, drawing Beijing’s ire as well.
China’s top graft-busting watchdog earlier this year vowed to eliminate ideas of a Western-style “financial elite” and rectify the hedonism of excessive pursuit of “high-end taste”.
That has prompted a slew of financial firms, both by state-owned and private-sector, to take proactive measures to ensure they don’t fall foul of the authorities, even as official rhetoric on President Xi Jinping’s “common prosperity” drive has ebbed.
Among those measures, staff at a large Chinese state-owned mutual fund and a mid-sized bank have instructed staff not to show off high-end lifestyles, said employees at the firms, declining to be named due to the sensitivity of the matter.
The mutual fund has also asked staff to refrain from posting pictures of expensive meals, clothes or bags on social media, said an employee, to avoid attracting regulatory glare or public criticism.
The mid-sized bank’s employees have been asked to not wear luxury brands or carry luxury bags at workplace, said a person at the lender, adding staff have also been told they can’t stay at five-star hotels when travelling for work.
Senior executives at a state-owned insurance company have also been told to not wear expensive clothes to work, said another person with knowledge of the matter, also declining to be named as those instructions are confidential.
Industrial and Commercial Bank of China (ICBC) and China Construction Bank (OTC:) Corp (CCB) plan to cut some allowances of employees at the banks’ headquarters from this year, two sources familiar with the matter said.
Allowances to be impacted include one-time summer allowances of about 1,500 yuan ($210) to 2,000 yuan a month, which will be abolished from this month, said the sources, who also declined to be named.
ICBC and CCB did not respond to Reuters request for comment.
SALARY, BONUS CUTS
CITIC Securities is cutting pay across its investment banking division, lowering base salaries by up to 15%, Reuters reported earlier this month, in a rare move as Beijing pushes to bridge income disparity.
Domestic rival China International Capital Corp (CICC) last month cut this year’s bonuses for investment bankers by 30%-50% from a year earlier, Reuters has reported, citing sources with knowledge of the matter.
Besides anti-corruption crackdown and “common prosperity” drive, financial firms are also reining in the flashy lifestyle of their staff to make sure they are not violating the Communist Party’s ideology, said industry officials.
To strengthen the ideological and political role of the party in China’s overall financial system, Beijing is setting up a new financial watchdog as part of a broad reorganisation of government bodies in Xi’s third term as president.
China’s securities regulator and the central bank cut the budget allocation for employee salaries in 2023, following reforms ordered as part of a broader drive to reduce income disparity, Reuters reported last month.
Analysts have said staff at the central bank and securities regulator had faced possible pay cuts as a result of the reforms to financial regulatory bodies announced in March that called for their staff’s pay to be put on par with public servants.
“At a time when economic growth momentum has been sluggish and the overall budget of the government is not growing as fast as before, how to distribute resources and benefits within the regime is a key political priority of the Party and most important driver behind the current austerity push,” said Xin Sun, who teaches Chinese and East Asian business at King’s College London.
“Inequality in China has reached a high level for a long time,” Sun said, adding what the Party now does by cutting the benefits of “financial elites” is aimed to quell inequality within the regime for political stability.