In a significant move aimed at aligning with the Chinese government’s ‘common prosperity’ initiative, a top 10 fund manager, China Merchants Fund Management (CMFM), has demanded its senior executives return any salary exceeding a new cap. This initiative, launched in 2021, seeks to address social and income inequality as economic growth slows.
CMFM, wholly owned by China Merchants Group (CMG), one of China’s largest state-owned conglomerates, has set a 3 million yuan ($421,330) annual salary cap for each year from 2019 to 2023. The executives are required to repay any income beyond this limit. The firm, which is run by six executives with another three managing subsidiaries, has not responded to requests for comment.
This move is not an isolated incident. Capping salaries and recalling pay have become common strategies for state-owned companies to adhere to the ‘common prosperity’ campaign. The campaign has also targeted the extravagant lifestyles of the financial elite.
Fund managers have come under particular scrutiny due to their high profits, even as the stock market has struggled. CMFM had already requested some portfolio managers to return pay exceeding the 3 million yuan threshold in July. In June, the Shenzhen-based firm informed both portfolio managers and senior executives, approximately 60 individuals in total, about the new policy and started receiving repayments in July. It remains unclear whether CMFM can pursue repayment from former staff.
Group affiliate Bosera Asset Management, 49% owned by CMG, also capped pay at 2.9 million yuan and demanded some staff return any excess received last year. At least two other fund managers have implemented a five-year claw-back policy, with senior management being the primary targets.
The increased scrutiny of the fund management sector is further evidenced by audits conducted by the National Audit Office in the first half of 2023. The auditors visited CMFM and approximately a dozen other fund managers, deeming salaries at some firms too high and requesting the implementation of pay caps and recovery of excess payments. The National Audit Office declined to comment on the specifics of their requests to CMFM.
According to the 2023 China Salary Guide from headhunter Morgan McKinley, the base salary for senior executives and department heads in sales and investing at Chinese fund managers ranges from 1.6 million yuan to 6 million yuan.
