China to set annual salary cap on finance sector amid common prosperity push, sources say

The 3 million yuan (US$412,460) yuan annual salary limit will be applied to all state-backed financial institutions, sources say

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Pedestrians cross a road in the Lujiazui financial district in Shanghai. China is planning to cap the salaries of finance executives. Photo: Bloomberg

Published: 7:30am, 4 Jul 2024

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.

The move is the latest in a series of steps to align with President Xi Jinping’s initiative of common prosperity, which stresses even wealth distribution at a time when the nation is facing economic headwinds.

The financial industry, which is seen as elite in China, has come in the cross hairs of top policymakers since a young trader at China International Capital Corp in 2022 flaunted his salary on social media, drawing the ire of the public. This was swiftly followed by a slew of investigations into corruption cases involving senior regulators and executives.

“The financial industry hasn’t done much to contribute to the real economy in recent years and the industry’s image isn’t that good among the public,” said Dai Ming, a fund manager at Huichen Asset Management in Shanghai.