Bank of China takes nationwide action to address salary gap between employees and managers – sources

Bank of China takes nationwide action to address salary gap between employees and managers - sources

Bank of China Implements Salary Reforms to Support “Common Prosperity” Drive

Bank of China

BEIJING, Aug 14 (ANBLE) – In a surprising move to address income inequality and support the Chinese government’s “common prosperity” drive, Bank of China Ltd (601988.SS), the country’s fourth-largest lender by assets, has launched a nationwide initiative to reduce salary gaps among its employees and mid- and high-level managers, according to three sources with knowledge of the matter.

President Xi Jinping initiated the common prosperity drive in 2021 to tackle income inequality, which could pose a threat to long-term economic growth and the legitimacy of Communist Party rule. With this motivation in mind, the Bank of China has taken steps to align with the government’s objectives.

Commercial banks in China have been grappling with issues such as record-low profit margins due to disruptions from the embattled property sector and local government debt risks. Against this backdrop, the Bank of China’s decision to address wealth inequality within its own organization is a significant and positive step.

The bank’s salary management system has been scrutinized by an inspection team under the Central Commission for Discipline Inspection, which has identified issues of “wealth inequality” in multiple investigations since late last year. This internal review has prompted Bank of China to implement a comprehensive “salary management system reform plan” to rectify the disparities.

While details of the plan have not been officially released, two sources have indicated that a significant milestone has already been reached, with the completion of the plan’s implementation at the bank’s headquarters in the first half of this year. This achievement paves the way for the next phase: rolling out the plan to branches across the country.

According to an internal notice seen by one source, the bank aims to fully implement the plan across its branches within the next two years. The notice also reveals that as part of the reform, employees below mid-level management have seen their salary packages raised by approximately 10% to 15%. Conversely, salaries for higher-level managers have been reduced by a similar percentage range.

Positive feedback from Bank of China’s Shanghai branch staff confirms that the salary reforms are in progress. Just last week, employees in the Shanghai branch received a notice stating that the bank would be actively reducing pay gaps there as well. This shows the bank’s commitment to creating a fairer compensation structure not only at the headquarters but also across its branches, ensuring that the “common prosperity” drive is embraced at all levels.

The Bank of China’s initiative has come as a surprise to many state bankers, who typically earn less than their peers at investment banks and other local financial institutions. In a rare reprieve, state bankers were spared from pay cuts last year when the government called for the promotion of “common prosperity.” However, with the Bank of China’s recent salary reforms, it is evident that the concept of common prosperity is gaining traction throughout the banking sector.

While it is still too early to measure the full impact of the Bank of China’s salary reforms, it serves as a positive example of a financial institution taking action to address income inequality within its own ranks. By aligning with the government’s “common prosperity” drive, the bank aims to contribute to overall social stability and economic growth. The steps taken by the Bank of China highlight the importance of addressing wealth disparities as a key factor in achieving sustainable development.