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May 1, 2023

Citic Securities Cuts Executive Pay Amid Push for "Common Prosperity"

Citic Securities Cuts Executive Pay Amid Push for "Common Prosperity"
Ethan Rose
Ethan Rose

Citic Securities, a leading Chinese brokerage firm, has significantly reduced the remuneration of 35 executives and directors in 2021. The company paid them a combined total of 104 million yuan ($16.5 million), down from 166.5 million yuan ($26.4 million) distributed among 28 individuals in the previous year.

The pay cuts are seen as part of Chinese President Xi Jinping's push for “common prosperity,” which aims to reduce income inequality within China and promote economic growth that benefits all citizens. This move has caused concern across the brokerage industry as other firms may face similar pressures to cut executive salaries.

"Since the new cabinet took power in mid-March, at least 12 financial executives or regulatory officials have been investigated," said Zhang Weiwei, an analyst at Huatai Securities Research Institute.

Despite these salary reductions, working in finance remains a relatively high-paying industry compared to other sectors in China. However, there is potential for further pay cuts this year due to soft economic growth and large-scale layoffs stemming from fewer initial public offerings (IPOs).

Fundraising efforts through IPOs on both Hong Kong and mainland stock exchanges could also be adversely affected by broader workforce reductions taking place domestically and ongoing trade tensions with the United States.

"The blockade enforced by the US may contribute to a slowdown in fundraising activities," explained Zhao Xuejun, an economist at Bank of Communications International Holdings Ltd.

Executives within Citic Securities have accepted their reduced compensation packages without significant resistance so far. As pressure mounts on companies throughout China to embrace President Xi's vision of common prosperity more extensively, it remains uncertain how long such compliance will continue without causing unrest or impacting business operations.