【Epoch Times News January 28, 2025】The Chinese Communist Party plans to implement comprehensive salary reductions and limits on salaries for 27 central financial institutions starting from February. The annual salary for employees will be capped at 1 million yuan, with senior and mid-level management potentially facing up to a 50% reduction in annual salary. Analysts believe that this move reflects the continued economic downturn in China, with heavily indebted financial state-owned enterprises having to cut personnel costs to alleviate financial pressure, revealing the stark reality of “funds shortage.”
Due to the ongoing economic slowdown in China, several recent media reports have highlighted the CCP’s plans to impose salary restrictions on 27 central financial enterprises. These companies include three major policy banks, five major state-owned commercial banks, four asset management companies, and six insurance companies.
Specific measures involve reducing salaries for employees earning over 1 million yuan annually, with some senior management personnel facing potential up to a 50% salary cut. Additionally, the salary limit for subsidiary directors has been set at 3 million yuan.
According to Reuters, the majority of these income reductions will primarily be carried out by reducing bonuses, affecting financial enterprises estimated at a scale of 67 trillion US dollars. Most salary cuts will be implemented through reduced bonuses, with salary reduction actions set to begin as early as February.
Voice of America reported that interviewed analysts generally believe that these austerity measures are unavoidable under China’s economic recession.
Xie Tian, a lecturer at the Business School of the University of South Carolina, stated that various levels of the Chinese government are currently cash-strapped, with financial state-owned enterprises burdened with heavy debts and poor performance. Despite the regulation capping annual salaries at 1 million yuan, this amount is still unmatched compared to other industries. This forced action of reducing or restricting employee income serves as a necessary cost-cutting measure for financial state-owned enterprises facing reduced income and heavy debts.
Xie Shunfeng, deputy researcher at the Taiwan Institute of Financial Research and Training, remarked, “This should indicate that there are subjective and objective factors at play. It appears that this is more of an objectively compelled direction to move in, resembling a passive response to the current circumstances.”
Beyond the overall economic impact, the serious corruption within China’s financial sector in recent years is another reason authorities have introduced salary limits and adjustments.
Derek Chang, associate professor of international trade at the Taiwan Chihlee University of Technology, mentioned that with the CCP’s vigorous crackdown on financial corruption, many Chinese citizens have begun noticing that salaries and benefits for financial executives are overly generous, leading to discontent. In light of this, the CCP government has started investigating the salary issues within financial institutions, making the five major state-owned banks the focal point of anti-corruption efforts, serving as one of the background reasons behind the salary caps for financial state-owned enterprise employees.
He also noted that as the Chinese economy deteriorates, banks’ non-performing loan ratios increase, prompting the CCP government to adopt a loose monetary policy, specifically lowering interest rates to stimulate economic development. However, this approach has caused issues within the profit model for banks relying on interest rate spreads, resulting in poor performance and the need to address the current challenges by lowering salary levels, constituting a second background factor.
Overall, it is evident that both the rapid financial bubble resulting in corruption and the economic downturn leading to reduced bank profits create a dual pressure for lowering personnel costs.
In fact, the Chinese financial industry has already seen a wave of salary reductions. Last year, social media in mainland China circulated the tragic case of a 30-year-old female employee of the China International Finance Co., Ltd. who died by suicide due to a pay cut, leading to her inability to pay off housing loans. It was reported that the deceased’s husband also faced a salary cut. While the company confirmed an employee’s passing, they only mentioned the employee’s death was due to “personal reasons.”
Shanghai First Financial has also reported that amid China’s economic downturn, salary reductions have become common in Chinese banks and securities firms. In 2023, the average salary reduction among Chinese bank management reached 13%, while China International Finance Co. bid farewell to the era of an average salary of 1 million yuan, drastically dropping to 704,000 yuan per employee annually, a decrease of nearly 120,000 yuan per year, making it the company with the largest salary reduction among the 22 securities firms.
Chang Hongyuan stated, “This incident occurred already by 2024, so at the beginning of 2025, it has significantly and substantially reduced the assets of state-owned banks, although it is primarily superficial.”
Amid salary restrictions on financial institutions, the CCP also announced an increase in the minimum wage standards for 19 provinces and cities to 2,100 yuan.
Currently, the region with the highest monthly minimum wage in China is Shanghai (2,690 yuan), followed by Jiangsu (2,490 yuan), Zhejiang (2,490 yuan), Beijing (2,420 yuan), and Shenzhen (2,360 yuan).
Analysts believe that the CCP government’s salary constraints on financial state-owned enterprises and adjustments to the minimum wage are more aimed at stability considerations rather than economic development strategies.
Xie Shunfeng, deputy researcher at the Taiwan Institute of Financial Research and Training, commented that while the CCP restricts the salaries of financial high-ranking officials, it simultaneously increases the minimum wage. Although these two actions are independent events, “if we carefully analyze, you will find that behind this, there is a single purpose, mainly to maintain stability. It appears as if the wealth gap is narrowing, but in reality, it is more about stability.”
In conclusion, whether it is the financial industry, the entire labor class in China, or even civil servants resorting to “distant water fishing” due to insufficient income security, all of these are interconnected to China’s economic downturn and worsening financial situation. How the CCP government utilizes policy measures to strive for stability in light of these challenges should be the central focus.