© Reuters. FILE PHOTO: A man rides his bicycle across the street under the Guomao bridge at the Central Business District in Beijing, China, October 19, 2015. REUTERS/Jason Lee/File Photo
BEIJING (Reuters) – Bank of China Ltd, China’s fourth-largest lender by assets, has launched a countrywide exercise to reduce the salary gaps among its employees and mid- and high-level managers in response to Beijing’s “common prosperity” drive, three sources with knowledge of the matter said.
President Xi Jinping launched the common prosperity drive in 2021 as an effort to reduce income inequality, which could threaten long-term economic growth and even the legitimacy of Communist Party rule.
Bank of China didn’t immediately reply to a Reuters’ request for comment.
The move follows pay cuts being made at investment banks such as China International Capital Corp (CICC).
Commercial banks have suffered record low profit margins due to disruptions from the embattled property sector and local government debt risks in a faltering economy.
The sources said Bank of China has launched an internal “salary management system reform plan”, after an inspection team under the Central Commission for Discipline Inspection found the bank’s pay system has issues of “wealth inequality” in several rounds of investigations since late last year.
The sources declined to be named as they were not authorized to speak with media.
Two of the sources said the bank had finished implementing the plan at its headquarters in the first half of the year.
It is now rolling out the plan to its branches across the country and plans to complete that process within the next two years, according to an internal notice seen by one of the sources.
Under the plan, the salary package for employees below mid-level managers was raised by about 10% to 15%, and salaries for higher-level managers were reduced by a similar range, a second source said.
A third source said the bank’s Shanghai branch staff last week received notice that the bank would be reducing pay gaps there.
The move also comes as a surprise to state bankers, who generally earn less than peers at investment banks and other local financial institutions and who were spared from pay cuts last year after Beijing called for the promotion of common prosperity.