China Imposes Income Cap on Financial Sector

BEIJING/HONG KONG (Reuters) – China is set to impose a 1 million yuan ($137,309) cap on the annual income of staff at central government-owned financial institutions. This move expands a campaign against excess amid an economic slowdown.

Those whose income exceeds 1 million yuan will see their payouts cut, with middle and senior managers potentially facing halved incomes. This overhaul affects 27 financial giants, including the “Big Five” banks, six leading insurers, and four major bad debt managers.

The bulk of these cuts will come from reduced bonuses. The most extensive wage reduction in the $67 trillion finance sector is expected to begin as early as next month, though staff have yet to be informed of the reasons behind it.

The income cap aligns with the government’s “common prosperity” initiative, which began in 2021 to tackle social and income inequality as growth slowed in the world’s second-largest economy. Both state-owned and private financial firms have been proactively lowering salaries and bonuses while discouraging displays of wealth, such as wearing expensive clothing and watches.

However, the cap at state-owned financial institutions may hinder the retention of top talent, as private-sector rivals continue to offer competitive salary packages. Reportedly, executive income at subsidiaries, including investment banks and asset managers, will be capped at 3 million yuan, although some currently earn up to 5 million yuan.

Additionally, the government plans to cut salaries at the central bank and two financial regulators by about half to align with other civil servants’ income. This salary reduction appears contradictory to government efforts aimed at boosting consumption to stimulate economic growth. Recently, millions of government workers received a surprise average increase of about 500 yuan monthly.

Department heads, who manage front-office operations, will be most affected, as their incomes often exceed those of chairs and presidents—already subject to caps between 700,000 and 900,000 yuan. A new rule will prevent subordinates from earning more than their superiors within the targeted firms.

> ($1 = 7.2828 Chinese yuan renminbi)