"China plans to cap the annual salaries of financial workers at around 3 million yuan (US$412,460), as the government doubles down on its campaign to eradicate extravagance and hedonism from the industry and narrow the wealth gap amid a persistent downturn in economic growth, according to people familiar with the matter.
The limit will be applied to all state-backed brokerages, mutual fund firms and banks, except financial institutions backed by private investors, the sources said, adding that the information is not meant to be made public.
The measure will be applied retroactively, meaning those who earned more than 3 million yuan over the past few years will probably have to return the excess money to their companies, the sources said."
It’s a nice start but i think they can do better. How about next year they cut that down to 2 million yuan and the year after to 1 million. That’s still plenty more than do-nothing parasitic financial speculators should be getting. And include private firms too.
It looks like this started in 2022 for state-owned/state-invested financial corporations due new policies, but the pay cap seems to have always been an unconfirmed rumour that started from 50m to 15m and now 3m.
As for the part about applying this retroactively, here’s a new term I learnt from this: clawback, a situation in which a government or company takes back money that it has already paid. Known as 绩效薪酬追索扣回机制, such mechanisms seem to have been introduced in China back in 2010 for commercial banks, and expanded in 2021 to banking and insurance institutions. Clawback basically takes back money from performance-based salary or bonuses and not basic salary.
A quick search on Baidu with the term “退薪” (return salary) shows that state-owned banks have already invoked this clawback mechanism in the past year or two, here are some related English news articles:
China Merchants Bank to Recover USD8.3 Million in Staff Bonuses to Rein In Risk
China’s banks cut salaries, rescind bonuses amid economic slowdown and Beijing’s financial reshuffle
When the news mentions recover/rescind bonuses that’s probably where the clawback occurs.
Also interesting new opinion from SCMP: Chinese bankers go communist – good for them
If it works fine and it’s really retroactive they can always retroactively do that too.
Either way, It’s a nice solution that people might not even talk much about because it always looks impossible but hopefully they do something like this to show the world it can be done and hopefully they continue it with things like 100% taxes for billionaries and lower it with time as well.
