China’s well-heeled financial dealmakers are getting a crash course in austerity with pay cuts and perks reined in, as their state-owned employers respond to Beijing’s “common prosperity” drive, eight people with knowledge of the matter said.

State-owned investment banks including China International Capital Corp (CICC) and Citic Securities have implemented pay cuts this year as well as delayed bonus payments to their staff, four of the people said. The cuts, in some cases, amounted to as much as 60%, they said.

Others such as state-owned China Merchants Securities have slashed travel and entertainment allowances since the beginning of the year, two other people familiar with the matter told Reuters.

“Capping the salary of the financial industry is in line with the broad trend, and it is also part of the common prosperity drive,” said Xia Chun, chief economist at wealth manager Yintech Investment Holdings in Hong Kong.

Despite China’s economic slowdown, the financial sector was one of the few lucrative industries for professionals after regulatory crackdowns on two other high-paying sectors – technology and property – led to job losses.

Pay cuts for investment bankers in China started last year in response to a business downturn as the economic slowed, but industry watchers said the trend has gained momentum this year under the “common prosperity” drive. That could affect talent retention at a time Western investment banks are expanding in China.

The trend of slashing salaries was reinforced after China’s securities industry association urged the country’s brokerages in May to set up a sound remuneration system, warning that excessive, or short-term incentives could lead to compliance risks.

The trigger was President Xi Jinping’s renewed drive for “common prosperity“, launched last year as an effort to reduce income inequality that threatens long-term economic growth and even the legitimacy of Communist Party rule.

Although official rhetoric on “common prosperity” may have ebbed slightly in recent months because of the slowing economy, sources said perks and pay at banks and financial companies remain under pressure.

Investment bankers are going to see a “thorough check on pay” with a spotlight on headline-grabbing remuneration, said a senior executive at a state-owned investment bank, declining to be named due to the sensitivity of the topic.

The executive said “common prosperity” was no longer a concern only for central government-owned financial firms but had trickled down to state investment banks and become the “guiding spirit” for pay talks this year.

All the sources with knowledge of the compensation changes at investments banks declined to be named as they were not authorised to speak to the media.

CICC and Citic did not respond to Reuters’ requests for comment.

China Merchants said in an emailed statement: “Affected by COVID-19 and other factors, business trips across the whole industry were significantly reduced, and the company’s travel expenses have dropped accordingly.”

Economy class

Thirteen of China’s 30 highest paying investment banks lowered pay packages of their senior management and board members in 2021 from a year previously, according to bank filings compiled by Reuters, the latest data available.

That figure is expected to rise this year as more firms adopt the “common prosperity” drive.

A senior investment banker in China could earn between three million and 10 million yuan ($445,000-$1.48 million) a year in total remuneration, excluding stock incentives, industry sources said.

A Shanghai-based senior equity sales executive at a state-owned investment bank said he was one of many bankers in the sector whose pay was cut last year, while company profits jumped more than 25% in the same period. The banker declined to give details.

He said the two highest-paid managers at his firm with more than 10 million yuan each in 2021 pay appeared to have volunteered to take a pay cut, although that could have been forced on them because of the scrutiny on high flyers.

The executive also said his employer gave verbal guidance to staff in January not to post photos depicting a lavish lifestyle on social media after a junior analyst at a rival firm drew public criticism for posting her annual pay slip of 2.24 million yuan.

On average, a Shanghai professional from outside the finance industry earned 78,000 yuan in disposable yearly income in 2021, according to official municipal authority data.

Along with pay and bonuses, perks have also been scaled back in the finance industry.

An internal CICC memo, issued in April and seen by Reuters, said all staff may only fly economy domestically as well as overseas from May 1. Previously, its managing directors and executive directors could fly business at home and abroad.

CICC did not comment on the memo.

Reuters

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