Chinese financial institutions are actively implementing austerity measures in response to Beijing’s efforts to address the wealth gap, which include reducing salaries, bonuses, travel, and entertainment expenses, as well as imposing dress code guidelines prohibiting the display of expensive clothing and accessories.
These measures coincide with the government’s determination to combat corruption within the country’s extensive financial sector, particularly amid weakening economic growth and a significant rise in youth unemployment rates.
Financial professionals in communist China are known to be highly remunerated, leading to public criticism on social media platforms as the economy slows down and wealth disparities become more apparent. In line with this, China’s anti-corruption watchdog has pledged to eliminate the notion of a Western-style “financial elite” and curtail the excessive pursuit of a lavish lifestyle associated with “high-end taste.”
Consequently, numerous financial firms, both state-owned and private, have taken proactive measures to ensure compliance with regulations and public sentiment, even as the official rhetoric around President Xi Jinping’s “common prosperity” drive has subdued. For instance, employees at a prominent state-owned mutual fund and a mid-sized bank have been instructed not to exhibit opulent lifestyles or post images of extravagant meals, clothing, or accessories on social media.
The employees of the mid-sized bank have also been directed not to wear luxury brands or carry luxury bags in the workplace, and to refrain from staying at five-star hotels during work-related travel.
Similarly, senior executives at a state-owned insurance company have been advised against wearing expensive attire to work. Notably, major banks such as Industrial and Commercial Bank of China (ICBC) and China Construction Bank Corp (CCB) are reportedly planning to reduce certain allowances, including summer allowances, at their headquarters.
In addition, CITIC Securities has announced pay cuts across its investment banking division, with base salaries being lowered by up to 15%, as part of efforts to bridge income disparity.
China International Capital Corp (CICC), a domestic rival, has also reduced this year’s bonuses for investment bankers by 30%-50% compared to the previous year.
Apart from the anti-corruption crackdown and the pursuit of “common prosperity,” financial firms are also curtailing the extravagant lifestyles of their employees to ensure alignment with the ideology of the Communist Party, as per industry officials.
As part of a broader reorganization of government bodies during President Xi’s third term, Beijing is establishing a new financial watchdog to bolster the party’s ideological and political influence in China’s financial system.
Last month, China’s securities regulator and central bank reduced the budget allocation for employee salaries, following reforms aimed at reducing income disparity.
These reforms, announced in March, called for aligning the salaries of central bank and securities regulator staff with those of public servants, potentially resulting in pay cuts for employees in these organizations.
Analysts have suggested that the sluggish economic growth and limitations on the government’s budget have prioritized the distribution of resources and benefits within the regime, making the current austerity measures a key political agenda for the Communist Party.
Xin Sun, a professor specializing in Chinese and East Asian business at King’s College London, emphasized that the distribution of resources and benefits is a critical political priority for the Party, particularly when economic growth momentum is sluggish and the government’s overall budget is not expanding at the same pace as before.
As consumer prices surge and inflationary concerns intensify in China, financial firms are compelled to proactively implement austerity measures in order to mitigate the impact of rising costs on the economy and safeguard long-term stability, while also aligning with the government’s agenda of addressing wealth disparities and promoting a more equitable society.