China’s leading securities firm, China International Capital Corporation (CICC), is significantly reducing its basic salaries to cut costs amid the economic slowdown and sharp drop in IPO listings in the Chinese and Hong Kong stock markets, according to sources.
Several sources told Reuters that many traders at CICC have seen their basic salaries cut by 25%, underscoring the serious challenges facing the Chinese financial industry.
Last Friday, some affected traders reportedly received notices of salary reduction, with two sources stating that the pay cuts would take immediate effect and are expected to impact over 2,000 employees.
CICC is one of China’s largest investment banks. The company did not immediately respond to Reuters’ request for comment on the reported salary reductions, following a similar move in April last year when CICC cut bonuses by as much as 40%.
While investment bankers typically receive additional bonuses based on performance, significant cuts to basic salaries are uncommon in the industry.
In June last year, sources revealed that CITIC Securities had reduced compensation in its investment banking division by cutting basic salaries by 15%, with some employees even facing cuts of up to 20%.
According to data from the London Stock Exchange Group (LSEG), funds raised by Chinese companies through initial public offerings (IPOs) in the first quarter of this year dropped significantly by 80% compared to the same period last year, totaling only $2.9 billion.
Under pressure from the Chinese authorities’ advocacy of “common prosperity,” the financial industry in China has been reducing salaries and bonuses over the past few years, requiring employees to avoid wearing expensive clothing to work.
Elite brokers have long occupied the pinnacle of the financial industry’s salary pyramid in China. However, as the economy slows down, their high salaries and lavish spending have faced criticism on social media platforms by the public.
An insider mentioned that CICC is also considering downsizing its Hong Kong investment banking division.
According to CICC’s annual report released in March, fundraising from mainland IPOs in 2023 decreased by 31% from 2022, amounting to 359 billion RMB (approximately $49.5 billion). Meanwhile, funds raised from Hong Kong IPOs saw a more substantial drop of 56%, reaching $5.9 billion.
The report indicated a 19% decrease in shareholder net profit in 2023 compared to 2022, totaling 6.2 billion RMB, following a 29% decline the year before.