What’s new: Five of China’s largest state-owned banks said on Friday that they have not factored in pay cuts in this year’s budget, in response to news of salary adjustments in some centrally administered financial state-owned enterprises (SOEs).
The banks — Bank of China Ltd., Industrial and Commercial Bank of China Ltd. (ICBC), China Construction Bank Corp., Agricultural Bank of China Ltd. and Bank of Communications Co. Ltd. — said that they have so far not set about budgeting for pay cuts despite salary reform being on the Ministry of Finance’s policy agenda.
Specifically, ICBC and Bank of Communications said that their total salary budgets are pegged to overall operational conditions and that salary arrangements will be made after running through corporate governance procedures. The other three banks said that in general their total salary allotments were in line with profit growth last year and that they have no pay cut plans this year for now.
What’s the background: The announcements from the five banks came after communication with the finance ministry on the issue, sources with knowledge of the matter told Caixin. The ministry has yet to make any public statement on the matter.
The Ministry of Finance manages budgets for centrally administered financial SOEs including salaries, and state-owned banks have to report these budgets annually. The five banks have yet to finalize 2020 salary allocations.
In May 2018, the State Council released guidelines on SOEs’ salary allotment mechanism. In October 2019, the finance ministry issued a notice on salary allotment reform for financial SOEs, and in January this year, published more detailed instructions on how to carry out such measures.
The sources said that in the latest round of pay reforms, some centrally administered financial SOEs might implement a 5% cut in their overall salary budget annually with the goal of cutting between 20% and 30% within three to five years. Since May, some financial SOEs have entered into discussions with MoF on salaries, but failed to reach a conclusion, the sources said.
In May, China’s three policy banks — the China Development Bank, the Export-Import Bank of China and the Agricultural Development Bank of China — have begun to plan for salary adjustments, people familiar with the matter told Caixin.
Contact reporter Timmy Shen (hongmingshen@caixin.com) and editor Heather Mowbray (heathermowbray@caixin.com)
