Analysis: China bankers told to shun flashy clothes, 5-star hotels in austerity drive

China Renaissance Holdings

19/06/2023 24:00

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      China cracking down on ostentation as wealth gap grows
    

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      Finance workers told to eschew luxury displays
    

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      Bonuses and pay cut as economic growth falters
    

  
    By Xie Yu, Ziyi Tang and Julie Zhu
       HONG KONG, June 19 (Reuters) - From cutting salaries and
bonuses and asking staff not to wear expensive clothes and
watches at work, to reining in travel and entertainment
expenses, Chinese financial firms have jumped on an austerity
drive as Beijing pushes to bridge the wealth gap.
        The steps come as authorities vow to clamp down on
corruption in the country's $57 trillion financial sector and as
growth in the world's second-largest economy weakens, with youth
unemployment hitting a record high.
        Financial professionals are among the highest-paid
workers in communist China and their wealth and flashy
lifestyles have often come under criticism from the public on
social media as the economy slows, drawing Beijing's ire as
well.
    China's top graft-busting watchdog earlier this year vowed
to eliminate ideas of a Western-style "financial elite" and
rectify the hedonism of excessive pursuit of "high-end taste". 
        That has prompted a slew of financial firms, both by
state-owned and private-sector, to take proactive measures to
ensure they don't fall foul of the authorities, even as official
rhetoric on President Xi Jinping's "common prosperity" drive has
ebbed.
    Among those measures, staff at a large Chinese state-owned
mutual fund and a mid-sized bank have instructed staff not to
show off high-end lifestyles, said employees at the firms,
declining to be named due to the sensitivity of the matter.
    The mutual fund has also asked staff to refrain from posting
pictures of expensive meals, clothes or bags on social media,
said an employee, to avoid attracting regulatory glare or public
criticism.
    The mid-sized bank's employees have been asked to not wear
luxury brands or carry luxury bags at workplace, said a person
at the lender, adding staff have also been told they can't stay
at five-star hotels when travelling for work.  
    Senior executives at a state-owned insurance company have
also been told to not wear expensive clothes to work, said
another person with knowledge of the matter, also declining to
be named as those instructions are confidential.
    Industrial and Commercial Bank of China (ICBC)  601398.SS 
and China Construction Bank Corp (CCB)  601939.SS  plan to cut
some allowances of employees at the banks' headquarters from
this year, two sources familiar with the matter said.
    Allowances to be impacted include one-time summer allowances
of about 1,500 yuan ($210) to 2,000 yuan a month, which will be
abolished from this month, said the sources, who also declined
to be named. 
    ICBC and CCB did not respond to Reuters request for comment.
 
    SALARY, BONUS CUTS 
    CITIC Securities  6030.HK  is cutting pay across its
investment banking division, lowering base salaries by up to
15%, Reuters reported earlier this month, in a rare move as
Beijing pushes to bridge income disparity.
    Domestic rival China International Capital Corp (CICC)
 3908.HK  last month cut this year's bonuses for investment
bankers by 30%-50% from a year earlier, Reuters has reported,
citing sources with knowledge of the matter.
    Besides anti-corruption crackdown and "common prosperity"
drive, financial firms are also reining in the flashy lifestyle
of their staff to make sure they are not violating the Communist
Party's ideology, said industry officials.
    To strengthen the ideological and political role of the
party in China's overall financial system, Beijing is setting up
a new financial watchdog as part of a broad reorganisation of
government bodies in Xi's third term as president.
    China's securities regulator and the central bank cut the
budget allocation for employee salaries in 2023, following
reforms ordered as part of a broader drive to reduce income
disparity, Reuters reported last month.
    Analysts have said staff at the central bank and securities
regulator had faced possible pay cuts as a result of the reforms
to financial regulatory bodies announced in March that called
for their staff's pay to be put on par with public servants.
    "At a time when economic growth momentum has been sluggish
and the overall budget of the government is not growing as fast
as before, how to distribute resources and benefits within the
regime is a key political priority of the Party and most
important driver behind the current austerity push," said Xin
Sun, who teaches Chinese and East Asian business at King's
College London.
    "Inequality in China has reached a high level for a long
time," Sun said, adding what the Party now does by cutting the
benefits of "financial elites" is aimed to quell inequality
within the regime for political stability. 

 (Reporting by Xie Yu, Julie Zhu and Selena Li in Hong Kong,
Ziyi Tang, Binbin Huang and Rong Ma in Beijing, Shanghai
Newsroom; Writing by Sumeet Chatterjee; Editing by Lincoln
Feast.)
 ((sumeet.chatterjee@thomsonreuters.com; +852 3462 7757;))