Analysis: Chinese bankers to avoid flashy clothing, 5-star hotels as part of austerity measures

By Xie Yu, Ziyi Tang and Julie Zhu

HONG KONG (Reuters) – From slashing salaries and bonuses, to asking employees not to wear expensive clothes and watches to work, to capping travel and entertainment expenses, Chinese financial firms have embarked on an austerity drive, while Beijing is pushing for it to close the wealth gap.

The moves come at a time when authorities are pledging to crack down on corruption in the country’s $57 trillion financial sector and at a time when growth in the world’s second largest economy is slowing and youth unemployment is at record highs reached.

Finance professionals are among the highest-paid workers in communist China, and their wealth and swanky lifestyles are often criticized by the public on social media as the economy slows, drawing the wrath of Beijing as well.

China’s top anti-corruption regulator earlier this year pledged to eliminate notions of a Western-style “financial elite” and correct the hedonism of over-pursuing “high-end tastes”.

This has prompted a slew of state-owned and private financial firms to take proactive measures to ensure they don’t run afoul of authorities, even as official rhetoric about President Xi Jinping’s quest for “shared prosperity” has faded.

Those measures include staff at a major Chinese sovereign wealth fund and a mid-sized bank telling employees not to flaunt luxury lifestyles, officials at the firms said, who asked not to be named due to the sensitivity of the matter.

The mutual fund also asked employees not to post pictures of expensive meals, clothes or bags on social media, one employee said, so as not to draw attention from regulators or public criticism.

Employees at the mid-sized bank have been told not to wear luxury brands or carry luxury bags to the workplace, a source at the lender said, adding employees have also been told not to stay in five-star hotels on business trips could.

Executives at a state insurance company were also instructed not to wear expensive clothing to work, said another person with knowledge of the matter, who also declined to be named because the instructions were confidential.

The Industrial and Commercial Bank of China (ICBC) and China Construction Bank Corp (CCB) plan to cut some allowances for employees at the banks’ headquarters starting this year, two sources familiar with the matter said.

The affected allowances include one-time summer allowances of about 1,500 yuan ($210) to 2,000 yuan a month, which will be phased out starting this month, said the sources, who also declined to give names.

ICBC and CCB did not respond to Reuters’ request for comment.

Salary, bonus cuts

As Reuters reported earlier this month, CITIC Securities is cutting salaries across its investment banking division, cutting base salaries by as much as 15%. It’s a rare move as Beijing pushes to even out income disparities.

Domestic rival China International Capital Corp (CICC) last month cut this year’s bonuses for investment bankers by 30% to 50% year-on-year, Reuters reported, citing sources with knowledge of the matter.

In addition to fighting corruption and pursuing “shared prosperity,” financial firms are also restricting their employees’ ostentatious lifestyles to ensure they don’t go against Communist Party ideology, industry officials said.

To bolster the party’s ideological and political role in China’s overall financial system, Beijing is establishing a new financial regulator as part of a major overhaul of government agencies in Xi’s third term as president.

As Reuters reported last month, China’s securities regulator and central bank have slashed budget allocations for staff salaries in 2023 after reforms were mandated as part of a broader initiative to reduce income inequality.

Analysts said central bank and securities regulators faced potential pay cuts as a result of financial regulators’ reforms announced in March that would align their employees’ salaries with those of public servants.

“At a time when the momentum of economic growth has been sluggish and the government’s overall budget is not growing as fast as before, the distribution of resources and benefits within the regime is a key political priority of the party and the main driver for the current trend.” Push austerity measures,” said Xin Sun, who teaches Chinese and East Asian economics at King’s College London.

“Inequality in China has long reached high levels,” Sun said, adding that what the party is doing now, by cutting the benefits of the “financial elites,” aims to suppress inequality within the regime and achieve 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; Text by Sumeet Chatterjee; Editing by Lincoln Feast.)

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