China International Capital Corp (CICC) is planning to demote some of its senior bankers and cut their pay as part of a new performance-rating system. The move is seen as a way for the bank to cut costs without making bankers redundant. Job demotions are rare at financial institutions and large companies. CICC has been slashing bonuses for the past three years amid a slump in deal making. The new performance-rating plan will place bankers into five categories, with only the top 5% receiving a bump-up in seniority. Last month, CICC notified its bankers in mainland China that their base pay would be cut by as much as 25%. The efforts to drive down costs come as deals from IPOs to mergers and acquisitions in China and Hong Kong have plummeted in recent years [37585fb3].
China's efforts to stamp out corruption in state-owned companies have intensified, with the replacement of more than three times the number of top executives compared to the same period last year. This purge is a clear signal of the growing push to eliminate graft in critical businesses. Chen Mingbo, the newly appointed chairman of China Aerospace Science and Technology Corp. (CASC), has called for increased efforts to make China a space power and build a world-leading military [f615388f].
China's financial sector is undergoing profound changes as new regulations challenge the capitalist principle of profit-seeking first. President Xi Jinping's goal to make China a 'financial superpower' has led to a shift in priorities, with banks being instructed to serve national strategies and tailor services to businesses and sectors they would have snubbed in the past. Pay cuts and lower incomes have replaced the lavish lifestyles once enjoyed by bankers. The government has outlined specific areas that banks must focus on, including science and technology, the green economy, inclusive finance, care for the elderly, and the digital economy. However, some analysts warn that Beijing's top-down approach may stifle competition and kill incentives in the financial sector [d337b93a].
China is taking drastic measures to stabilize its economy by purging senior officials in the financial sector. The central government's move comes as the country faces economic challenges, including market downturns and policy changes. The recent shift in government policy aims to reduce state intervention in failing financial entities and cool down the overheated real estate sector. As a result, many in China's affluent class, who previously benefited from rapid economic growth and government bailouts, are now facing significant financial losses [5f869997].
The latest development in China's efforts to stabilize its economy involves the removal of senior finance officials. This move is seen as part of President Xi Jinping's broader strategy to assert more control over the economy and curb the dominance of the private sector. The purge is aimed at addressing the challenges faced by the financial sector, including the ongoing turmoil in the property market and the high levels of debt among real estate companies. By removing senior officials, the government hopes to bring in fresh perspectives and implement more effective policies to stabilize the economy [b43de8a8].
The Chinese government's focus on stabilizing the economy has also led to a shift in its approach to the housing market. President Xi Jinping plans to revert to socialist housing policies, increasing the state's role in the sector. The aim is to boost the supply of state-built housing for low-cost rental or sale, with a target of at least 30% of the housing stock being government-owned. However, this ambitious plan faces challenges, including its projected cost of up to $1.4 trillion over five years and the complexity of implementation [66854926].
The property market remains a major drag on Chinese growth, with sales now 50% below their peak. Home sales are weak, price growth has cooled, and new housing starts are at their lowest levels since 2005. The recent liquidation of property developer China Evergrande, with more than $300 billion in liabilities, highlights the magnitude of the problem. Beijing's policies have so far failed to fix the issues in the property sector, including relaxing down payment requirements and pushing mortgage rates lower. Chinese banks are also directing more money to developers to help shore up their finances. A recovery in the property market is expected later this year, with sales now 50% below their peak and affordability improving as home prices fall. However, wealthy Chinese families are investing less in property than in previous years, so any turnaround is likely to be modest [42b2f436].
The recent surge in Chinese stocks, driven by Beijing's hints of market support, has seen significant gains. However, focusing solely on the stock market may not be the best use of resources to address China's economic challenges. Instead, rebuilding the country's housing market, which is currently experiencing a slow-motion implosion, could provide a more stable foundation for economic growth [77c32aed].
The purging of senior finance officials in China's financial sector is a significant step in the government's efforts to stabilize the economy. By removing these officials, the government aims to bring in fresh perspectives and implement more effective policies to address the challenges faced by the financial sector. This move is part of President Xi Jinping's broader strategy to assert more control over the economy and curb the dominance of the private sector. As China continues to grapple with economic challenges, including market downturns and policy changes, the government's actions will be closely watched to see if they can successfully stabilize the economy [b43de8a8].
The recent purge of a former Chinese justice minister provides insight into the impact of the deepening property crisis on President Xi Jinping's inner circle. The purge is seen as a clue that the crisis is now affecting Xi's powerful faction of political aides, indicating the severity of the situation. The government's move to reduce state intervention in failing financial entities and cool down the overheated real estate sector is a response to the economic challenges China is facing. However, the ambitious plan to increase the state's role in the housing market and provide low-cost government-owned housing faces implementation challenges and a high projected cost. The property market remains a major drag on Chinese growth, with sales plummeting and affordability improving as home prices fall. While the recent surge in Chinese stocks has seen significant gains, rebuilding the housing market may provide a more stable foundation for economic growth [7b19643c].
China's efforts to stamp out corruption in state-owned companies have intensified, with the replacement of more than three times the number of top executives compared to the same period last year. This purge is a clear signal of the growing push to eliminate graft in critical businesses. Chen Mingbo, the newly appointed chairman of China Aerospace Science and Technology Corp. (CASC), has called for increased efforts to make China a space power and build a world-leading military [f615388f].