The couple will transfer their son to a public school in September to save 300,000 yuan in annual tuition fees after the father’s basic monthly salary dropped to around 10,000 yuan per month.
Few would dispute that financial workers are overpaid
“It’s a rectification,” said Rui Meng, a finance professor with the China Europe International Business School.
“Few would dispute that financial workers are overpaid, which does not sit well with public perception when other sectors are struggling to keep people on the payroll.”
China’s financial industry used to be full to the brim with well-paid bankers and brokers, with Beijing encouraging financial players since the 2010s to model the industry after Western peers – including generous salaries – in a push to incentivise performance and internationalise operations.
One flagship case surrounded investment bank China International Capital Corporation (CICC), which boosted average annual pay from 700,000 yuan in 2018 to 1.15 million yuan (US$158,000) in 2020, according to annual reports, despite the national per capita income being only 35,128 yuan.
But as staggering pay rises raised eyebrows, the Wall Street way eventually fell out of favour as Beijing observed how some Western giants collapsed under the watch of well-paid executives and how bankers, acting only in self-interest, triggered and exacerbated financial crises.
Then came a rethink of the roles and responsibilities of financial workers and how to keep tabs on them.
In 2022, the opening salvo of what would be a succession of pay cuts was fired by the Ministry of Finance, when it issued a document requesting financial state-owned enterprises (SOEs) to limit packages for senior management.
Directives were given to financial institutions to bankroll national strategies, including technology, and forgo excessive profits while keeping risks at bay.
Warning of elitism and extravagance, Xi said financial workers must stay honest and trustworthy, righteously pursue profits and not seek quick success or benefits.
And the case of the couple in Shenzhen, amid the whirlwind changes, is hardly unique.
Many who climbed onto the finance gravy train in previous years now find their pay packages shrinking.
The average annual salary at Citic Securities in 2023 fell by 3.4 per cent to 775,900 yuan (US$106,700) from a year earlier.
China needs to loosen regulations, increase competition to drive down the price of financial services
Total pay for its directors and senior management at Citic Limited also dropped to 6.7 million yuan last year from 7 million in 2022.
CICC’s average annual salary, meanwhile, nearly halved to 696,800 yuan in 2023 from the highs of the 2020s.
The Hong Kong branches of some mainland Chinese banks have also been reviewing pay and making reductions in recent months.
Some are also streamlining operations in the city and replacing local staff with colleagues from mainland China.
Chen Zhiwu, a chair professor of finance at the University of Hong Kong, said while such pay corrections are warranted, a market-oriented way is better than top-down directives to decide compensation for financial professionals.
“China needs to loosen regulations, increase competition to drive down the price of financial services [to benefit people and businesses],” said Chen, adding that the sector’s high pay was also due to the shortage of financial services amid government overregulation and controls.
Clawing back paid bonuses could contravene labour laws and employment contracts, and there could be lawsuits
The pay cuts and salary cap, nonetheless, can alleviate the burden facing many financial institutions amid a dearth of initial public offerings, thinner interest margins and shrinking profitability, when China’s economic recovery is made uneven by stock and property sector slumps.
“Morale can be low, with the impact on work performance already there,” said Fu Weigang, executive president of the Shanghai Institute of Finance and Law think tank, warning high staff turnover may affect the sector’s ability to help stabilise growth.
Fu also said while watchdogs have every right to intervene as key stakeholders in financial SOEs, law and contracts must still be upheld.
“Clawing back paid bonuses could contravene labour laws and employment contracts, and there could be lawsuits,” Fu added.
Yao Yang, a Peking University professor, said that salary cuts are “not punitive” in nature, with some aimed at boosting other sectors deemed more important by Beijing amid manufacturing upgrades and tech self-sufficiency endeavours.
“[They are] intended to take the lustre off the financial sector so more talent and resources can flow to manufacturing and the real economy,” Yao said at a forum earlier this year.
“The starting salary in the financial sector has come down to the level of the tech sector.”
Rui from the China Europe International Business School also said, with the allure of the finance sector dimming, China’s best and brightest may flow to the tech sector.
But Chen at the University of Hong Kong warned that such pay cuts may only serve to drive away skilled financial professionals and depress supply of risk capital and other financial services.
“[Over time], tech start-ups and the real economy will also suffer if there is fewer risk capital and financial products to support them,” he said.