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The Chinese government has announced it will be cutting the “unreasonably high” salaries of banking executives.
This comes as the government seeks to curtail lavish expenditure and ease public discontent. Several state banks have pledged to its support, Bloomberg Businessweek reported.
The cut backs also include curbs on cars, club memberships, golf and physical therapy. Several banks in China are also planning to offer stock incentives for employees, an initiative which was banned in 2008 but recently reinstated, Financial Review reported. However, the roll out is expected to be a slow process.
Analyst estimates compiled by Bloomberg suggest China’s five biggest state-controlled bank will report the smallest growth in combined profit in a decade.
However, the move risks a talent exodus in a time where China needs skilled employees to help combat sourced credit, shadow banking and interest-rate deregulation, industry watchdogs say.
“The big four state banks are really large entities that depend on hundreds – if not thousands – of highly skilled bankers to operate,” Victor Shih, an associate professor at the University of California at San Diego, told Bloomberg, adding a mass exit of key staff could cause “a big mess”.