Morning Coffee: Just how far down the ranks will Chinese banks cut pay?

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Pay cuts have so far only hit the upper legions of Chinese state-owned banks. Chim Wai Kin, the chief credit officer of Bank of China, for example, left his US$1.4m job last month amid Government-imposed pay cuts on senior managers. And Wang Hongzhang, China Construction Bank executive chairman, has had his salary slashed by 50% as Beijing tries to bring market forces to bear on the compensation of executives who were often appointed on a political, not a commercial, basis.

While these executives have openly supported cuts to their own salaries, Chinese state banks could suffer recruitment and retention problems if Beijing’s so-called marketisation policy affects the pay packets of those lower down the ranks.

“Low compensation will make it hard to retain high-quality talent” at state-owned banks, Victor Wang, a Hong Kong-based analyst at Credit Suisse, wrote in a note last month.

By decreasing pay at state banks, talent would naturally flock to the private sector or joint-stock banks that are partially shielded from the salary rules, according to a person with years of experience inside state firms quoted in the South China Morning Post. In other words, Beijing may be deliberately cutting pay at state firms to bolster the hiring power of the private sector banks that it sees as key to modernising China’s financial system.

CICC is already starting to use compensation as a recruitment tool as it looks to rebuild its lost market share in investment banking. As we reported last week, it has paid some staff up to four times base salary in order to convince them to stick around.


CEOs of DBS, OCBC and UOB earned an average of S$1m more last year (Channel News Asia)

OCBC closes gap on top-ranked Singapore dollar bond arranger DBS. (Straits Times)

Will China's infrastructure bank work? (Guardian)

The British managing director of Jardine Lloyd Thompson's Hong Kong office is arrested after his daughter falls to her death. (Daily Mail)

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