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Insurers and banks to cut execs' pay

CHINA said yesterday that executives of state-owned banks and insurers are paid too much and ordered those firms to cut their salaries to promote income fairness amid an economic slump that has wiped out millions of jobs.

Executive pay for 2008 at financial institutions, which many are still calculating, must be cut to 90 percent of 2007 levels, with deeper reductions at those experiencing financial trouble, the Finance Ministry said.

"Individual financial enterprises pay top executives too much. The gap between them and average workers is clearly expanding," the ministry said in a statement on its Website. It said pay cuts were needed to "further equalize distribution of incomes."

The announcement gave no details on how many levels of management would be affected or how authorities will decide which institutions require bigger cuts.

All of China's major banks, insurers, stock brokerages and other financial institutions are government-owned. But many have Hong Kong subsidiaries that handle a portion of their operations and function as private companies, and it was unclear how executives linked to those entities might be affected.

The ministry praised executives who have already cut their pay, especially at institutions that are financially healthy.

Chinese executive pay is modest by Western standards but many times that of ordinary workers.

Yang Chao, chairman and chief executive of China's biggest insurer, China Life Insurance Co, was paid 1.7 million yuan (US$248,000) last year. That was a reduction from Yang's 2 million yuan in 2007 salary and bonuses.

China's second-largest insurer, Ping An Insurance Co of China Ltd, has been the only such institution to suffer a major loss because of the global crisis. It said yesterday that its 2008 profit fell 99 percent from 2007 because of losses on its stake in European bank Fortis NV, which ran into trouble with credit derivatives.

Ping An's chairman, Ma Mingzhe, announced in February he would give up his 2008 salary because of the Fortis loss.

China's state-owned asset regulator earlier called for lower payments to senior executives at the 141 centrally administered state-owned enterprises.

The growth of senior executives' salaries must be lower than profit growth and reflect performance, Shao Ning, deputy director of the State-owned Assets Supervision and Administration Commission, said last week.

Among the SOEs that have cut back, Wuhan Iron and Steel (Group) Co said it will reduce executive salaries by 50 percent and other employee salaries by as much as 20 percent. Aluminum Corp of China plans to cut executive pay by 50 percent and trim compensation for other staff by 15 percent.

The average gross salary for China's urban residents rose 17.2 percent in 2008, 1.5 percentage points slower than in 2007, the National Bureau of Statistics said yesterday. The average salary for city dwellers amounted to 29,229 yuan last year, up 4,297 yuan from 2007.

The average salary in the securities sector - 172,123 yuan - was the highest among all industries last year.


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