Amid the Chinese Communist Party’s call to “tighten belts,” two informed sources revealed to Reuters that employees at the Beijing branch of China Minsheng Bank are facing pay cuts of up to 50%.
As part of a broader salary reduction initiative, Minsheng Bank has also ceased payment of certain work-related expenses and other benefits at its Beijing branch. With over 4,000 employees, this branch is the largest within the Minsheng Bank network.
The two sources, who requested anonymity, stated that these measures have been fully implemented at the Beijing branch, but it remains unclear whether Minsheng Bank will adopt the same measures at its other branches.
This salary cut, reaching up to 50%, marks the largest reduction in recent years among major commercial banks in China.
Minsheng Bank and China’s banking regulatory authority, the National Financial Regulatory Authority (NFRA), have yet to respond to Reuters’ request for comments.
“Tightening Belts”
According to BBC reports, as China’s economy slows down and struggles to recover, the Chinese Communist Party declared a “tightening belts” campaign in 2023 to alleviate the financial difficulties caused by dwindling revenue. Currently, governments across China are issuing regulations in response to Beijing’s call to “tighten belts,” and civil servants were among the first to have their salaries reduced starting last year.
Financial institutions in China, both state-owned and private enterprises, have also implemented various measures including salary and bonus cuts, as well as prohibiting employees from wearing expensive attire to work.
China Construction Bank (CCB), the third-largest commercial bank in terms of assets in the country, reportedly asked its headquarters staff to take at least a 10% pay cut, as reported by Reuters in July.
Earlier this month, Reuters also reported that China’s CMB Fund Management Company, one of the top ten fund managers, has required senior executives to return excess salaries earned beyond the new limits set in the past five years.
Minsheng Bank’s salary cuts reflect concerns about its profitability. As China’s economy grapples with a sustained real estate crisis and looming deflation, lending institutions in China are facing pressure to lower lending costs.
Official data shows that as of the end of June, China’s banks had a net interest margin of 1.54%, hitting a historic low.
Minsheng Bank, a joint-stock commercial bank, had total assets of 7.7 trillion yuan (about $1.1 trillion) by the end of last year, ranking 11th among approximately 4,600 banks in China.
Established in 1996, Minsheng Bank was China’s first privately controlled commercial bank, but it has been severely affected by the country’s ongoing real estate crisis.
The lending institution is a major creditor of China Evergrande Group, which is at the heart of a domestic real estate industry crisis. Additionally, Minsheng Bank has been burdened by the financial troubles of one of its largest shareholders, China Oceanwide Holdings Group Co., Ltd.
In the first half of this year, Minsheng Bank saw a 5.5% year-on-year decline in net profit. The non-performing loan ratio for its real estate loans was 5.29% in the first half of this year, higher than the 4.92% recorded in 2023.