China’s state-owned financial sector prepares for ‘one of the toughest years’

Executives, who have been working in state-owned financial institutions of China, said that they are bracing for “one of the toughest years” they have seen, as Beijing plans to tighten its grip on the sector.

This means that pay cuts and long hours of compulsory ideological training will become a norm in the sector. Since the sector's overhaul was announced in March, the morale has plummeted as stated by four executives who are working at state financial institutions.

The plan, which was initiated by President Xi Jinping, is aimed at fighting corruption in the sector and ensuring that it is under the ruling Communist Party's direct control.

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The executives stated that the campaign is now their companies' top priority and was expected to run well into autumn. The executives emphasised the uncertainty brought by the “relentless” ideological and anti-corruption drives, sharp pay cuts in their basic salaries, which range from 15 to 20 per cent and slashing of annual bonuses by at least 30 per cent this year.

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Ideological study session

A state-owned securities firm's manager in Shanghai stated that his company held a recent ideological study session which was based on the Red Army’s Long March.

“Probably our party secretary wants us to be mentally prepared for tougher times ahead,” he stated. “State-owned financial companies aren’t an exception. They’re also part of China’s austerity drive at a time when the economy isn’t doing well, and as many civil servants get their pay cut too,” he added.

He stated that the financial sector's pay cuts were in accordance with Xi’s “common prosperity” goal to bridgethe wealth gap in China. Beijing has promised to end extravagance among “financial elites” in the country's state sector, as Xi makes efforts to make its institutions more compliant with his vision.

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As tensions rise between China and the West, the United States in particular, Beijing is appealing to its state banks to allocate more funds in areas which are identified as priorities for the country, such as technology self-reliance projects and advanced manufacturing.

The bankers and financial regulators are also being closely watched by Beijing for any sign of collusion with any foreign financial institutions to facilitate large outflows of Chinese funds.

China has also been concerned about increasing local government debt and wishes lenders to exercise caution on loans, and at the same time is observing the weaker financial institutions amid a banking crisis in the United States.

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