Chinese Central Banks run out of money

China’s economy is in recession with news of layoffs and salary cuts constantly emerging. Currently not only are workers experiencing wage arrears and layoffs, but these issues are also affecting the financial and banking system.  Many cases have been reported of employees being terminated without receiving their owed wages. Furthermore, depositors have found themselves unable to withdraw their money with their accounts disappearing without compensation.  Numerous Banks and Securities Companies in Mainland China have reduced employee salaries.

Leading to a wave of resignations among senior Executives, some experts believe that salary cuts are an inevitable consequence of an economic recession and may signal a significant downturn for the real estate industry. Others suggest that this is linked to the Xi Jinping government’s crackdown on high salaries in the financial sector though they argue that the methods employed are flawed and may ultimately harm the Chinese economy. Gong Shengle, an independent  Economist from Mainland China told the ‘Epoch Times’ on April 12 that wage cuts in the financial sector are an unavoidable outcome of China’s economic slowdown. The decline of China’s financial industry is an inevitable trend and reducing wages may be a necessary step.  He emphasized that if people are unable to deposit or withdraw money normally and Banks cannot provide loans and financing to businesses as usual it could lead to a crisis in the banking industry.

After China Merchants Bank’s slogan “living tight” became trending topic, news regarding ‘bank employees with an annual salary of 300,000 Yuan will have to live a “tight life”’ also trended on April 12. According to China News Weekly, the annual reports of China’s six major state-owned Banks indicate that except for China Merchants Bank and Industrial Bank the per capita salary at other Banks has declined. It is worth noting that reverse salary demands, where the bank demands back the employee’s salary and bonus, have gradually become the norm in the industry. In the 2023 annual report more than 10 listed Banks including China Merchants Bank, Bank of China, Bohai Bank, Harbin bank, Bank of Tianjin, Dongguan  Rural Commercial Bank and Chong Qing Rural Commercial Bank announced relevant information on performance pay recourse and deductions. Moreover, the bank’s performance-based pay recourse and rebate mechanism targets not only senior Executives but also key positions responsible for risk management and employees who have a direct impact on bank operating risks.

Furthermore, for some bank workers there is also the risk of being replaced as cost reduction and efficiency increase has become key priorities. According to banks annual report data the total number of employees at Agricultural Bank of China, ICBC, Industrial Bank and Ping An Bank declined to a certain extent in 2023. Employees at Guangzhou bank are experiencing wage arrears too. Many netizens reported that the Guangzhou bank credit card centre maliciously defaulted on and deducted the wages of all employees, including pregnant and lactating employees.  On January 19 when the bank was supposed to pay December wages an impromptu meeting was held where it was verbally announced that the salary team was too busy and the payment would be postponed to February 6. On February 6 another meeting was held where it was verbally announced that only 30% of December wages would be paid with 60% withheld. 

According to rank and the performance salary of all card centre employees would be discounted by 30% in 2024. The news of Guangzhou bank’s wage arrears sparked heated discussions on Weibo on February 7. Even during the Chinese New Year, the wages for December and January were not paid.  Wages are still owed and authorities have consistently cited settlement as the reason for arrears. In the beginning of April this year, Shanghai Pudong Development Bank cancelled the year-end bonus and on April 14 Guangzhou Bank defaulted on wages.  The situation is estimated to be even worse this year and the root cause is considered to be the underperformance of the economy.

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