Chinese government organizes a round of salary reforms and will reduce incentives; executives warn of talent drain
Financial sector professionals across China are bracing for a new round of salary reforms that could further squeeze their salaries.
Industry sources said the changes are expected to flatten salary structures at state-owned financial institutions, which will reduce incentives and could lead to a flight of talent. In highly competitive areas, where pay is closely linked to performance, many employees are already migrating to companies without salary caps, they stated.
Concern has grown in recent months after the MOF (Ministry of Finance) issued guidelines to the headquarters of state-owned financial institutions, outlining a broad framework for an industry-wide overhaul and instructing them to draw up detailed compensation plans, as found by Caixin with people familiar with the subject.
The guidelines follow a broader initiative by the Ministry of Human Resources and Social Security, carried out earlier this year, to curb excessive salaries in state-owned companies.
The main measures proposed by the ministry include the ban on “inverted remuneration” – in which employees at a lower hierarchical level earn more than their superiors – and the establishment of annual salary caps for directors of state-owned companies managed by the central government at around 1 million yuan (US$140,000). Heads of subsidiaries, who normally work more in market competition, can earn up to triple this amount.
There is a clear tendency towards wage tightening, he told Caixin an employee at a state-owned brokerage, highlighting the 3 million yuan annual salary cap introduced at state-owned brokerages last year.
IMPACT
The reform will affect 27 financial institutions administered by the central government, but its impact on subsidiaries is expected to be limited, according to industry sources who spoke to Caixin.
Some of the country’s “Big 6” state-owned commercial banks are already feeling the pinch. Preliminary proposals from ICBC (Industrial and Commercial Bank of China) drastically limit the remuneration of middle managers, as determined by Caixin together with several bankers.
At ICBC’s Beijing headquarters, department general managers may have their gross annual salaries capped at 1 million yuan, bankers said.
One of the main objectives of the reform is to eliminate “salary inversion”, a practice in which mid-level executives often earn more than senior executives, such as presidents and directors.
This imbalance led to corruption scandals in which managers “contributed” part of their salaries to their bosses in order to smooth the relationship, which led regulators to reestablish the alignment between authority and compensation.
“In the future, in general state-owned companies, the salary of the chairman of the board will be the highest, with salaries gradually decreasing according to the hierarchy”a person from a state bank told Caixinadding that mid-level managers will face substantial pay cuts.
It is worth noting that the MOF guidelines allow certain flexibility for subsidiaries. Those that depend entirely on the group’s internal business and do not face market competition will follow the parent company’s salary structure, a person at a state-owned financial institution told Caixinnoting that those that compete externally can apply a higher salary cap, up to 3 times the head office limit.
The criteria for defining “competitive” and “non-competitive” vary between different institutions. An insurance industry expert told Caixin that a crucial factor would be the percentage of business coming from related party transactions, but subsidiaries have room to argue in their favor.
TALENT LEAK
Government pressure to curb excessive wages in China’s financial sector has been mounting for years, with securities firms being one of the main targets.
A senior investment banker told Caixin that his salary has been reduced 3 times in the last 2 years, while his 2024 year-end bonus has decreased by more than half compared to the previous year.
Because of the pay cuts, the banker said some of his best employees were considering leaving the company. Even though they worked practically non-stop throughout the year, the project team members only received about 100,000 yuan – far less than what they usually received, he said.
An investment banker at (China International Capital) noted a similar trend: “In the past, the remuneration at CICC was practically the same as that of foreign investment banks, but now these banks offer 3 to 4 times more”. Since last year, several CICC-trained managing directors have been poached by foreign competitors, the banker said.
However, not everyone is eyeing the exit. Some believe the changes are unlikely to trigger mass layoffs. A mid-level manager at one of the “Big 6” banks told Caixin that reaching this level takes years and that many get used to the environment.
This report was originally in English by Caixin Global on November 18, 2025. It was translated and republished by Poder360 under mutual content sharing agreement.
