PRESIDENT XI JINPING has pledged to limit executive pay at China’s powerful state-owned companies, the latest point of emphasis in a sustained austerity campaign.
State-owned companies must realise more equitable salary levels, Xi said.
Unusually high executive salaries must be regulated.
The state media report did not provide any specifics on how pay should be limited at the state-owned firms, where official executive salaries often lag international rivals. Top executives at China’s biggest banks, for example, might have an official annual salary of only a few hundred thousand dollars.
Western bank CEOs can earn tens of millions.
Yet in a country where many migrant workers find it difficult to afford basic items, including housing, top executives and officials sometimes enrich themselves via other grey sources of income.
The inequity between rich and poor has been something of a government focus in recent years, and a subject that has drawn the attention of official state media.
Last year, Beijing released a plan to help close the gap between income groups, which included proposals that would hike select minimum wages and levy new taxes. Xi’s broader anti-corruption campaign, which has affected a wide swath of foreign and domestic companies, is one of the most notable initiatives of his first term.
Top executives have been targeted in the crackdown, along with Communist Party officials. Xi has gone so far as to limit spending on banquets, banning certain delicacies and even gift-giving — all in an effort to battle public discontent. Relatedly, China’s anti-corruption campaign has humbled multinational corporations, taken down senior officials and put brothels out of business.
Now the focus of President Xi Jinping’s campaign may have turned to wealthy Chinese trying to move their riches abroad. State broadcaster CCTV has accused Bank of China of conducting money laundering operations to help wealthy Chinese skirt controls on how much cash can be taken out of the country.
The bank, CCTV said last week, has bent over backwards to accommodate requests to move funds abroad, often before a customer decides to emigrate.
The spat between two arms of the state is unusual. CCTV has taken foreign carmakers, and even Starbucks, to task but rarely has it publicly accused another state institution of wrongdoing.
Bank of China has denied the allegations.
The accusations come just days after a senior member of the Communist Party spoke out against party members who send their families and wealth abroad.
These naked officials, as they are known in China, have long been able to launder money without attracting too much attention. They have been joined by thousands of wealthy citizens who want to move money out of China.
The flow of cash is taking place in spite of Beijing’s rules that limit the amount of money an individual can move out of China to US$50 000 per year.
CCTV claimed that Bank of China’s actions are helping to fuel a wave of Chinese emigration to destinations including the United States, Australia and Canada.
Almost two-thirds of Chinese with more than 10 million yuan (US$1,6 million) in the bank have emigrated, or are planning to, according to research firm Hurun.
A move abroad isn’t cheap. After all, immigrants need money to pay school fees, buy property and establish a new life.
The National Association of Realtors reported on Tuesday that Chinese property purchases were up more than 70 percent last year to US$22 billion — or nearly US$1 in every four spent by foreign buyers.
Bank of China isn’t the only game in town for would-be emigrants. Wealthy Chinese have also been buying fine art and other assets to move funds out of the country.
Macau’s casinos, which are now seven times the size of Las Vegas, are another popular option for money laundering. Some analysts believe Xi’s anti-corruption drive is more about consolidating Communist Party power than a genuine attempt to clean up the system.
But the latest moves could spur rich Chinese to think twice before booking that ticket abroad. Meanwhile, additional reports from China.org.cn suggest a salary cap of 600 000 yuan (about US$100 000) per year may be in the works for senior executives of this country’s state-owned enterprises. – CNN Money.
The reports have not been confirmed by the government.
This comes on the heels of Chinese President Xi Jinping suggesting that corporate salaries in this country’s SOE’s need to be reformed.
Li Jin, chief researcher with the China Enterprise Institute, says any cuts to salaries need to be tempered.
“We need to find that fine balance. If we cut their salaries so low, it will hurt their motivation and it hurts the basic incentive mechanism of running a company. But we should also consider the income level of other state employees such as civil servants. I think there has to be a clear definition of an executive’s job responsibility and how much of it is related to revenue creation for the company.”
It’s being reported certain executives with this country’s centrally-administered state-owned enterprises are earning upward of 10-million yuan per year through salaries and bonuses.
That number is about ten times or more of the average salary of an ordinary SOE employee. – China Daily.
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