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China orders salary cuts of top executives of public sector enterprises, following heavy criticism

Saturday, 30 August 2014 - 10:40am IST | Place: Beijing | Agency: PTI

Days after criticism by Chinese President Xi Jinping, the ruling Communist Party of China (CPC) has approved plans and decided to cut hefty salaries of executives of large state-owned enterprises (SOEs). During a meeting presided over by Xi yesterday, who also heads the party besides the military, the Political Bureau of the CPC approved plans to reform the payment system that determines SOE executives' salaries and the size of their expense accounts and other privileges.

"Deepening the reform of the payment system for executives of major SOEs is an important part of China's efforts to establish a modern corporate system and push forward the reform of the income distribution system," said a statement released after the meeting. Reform of the payment system for executives of major SOEs should proceed in light of the basic reality that China is still in the primary stage of socialism, it said. 

On August 18, Xi told a meeting that major SOEs must make sure their salary level is proper, their salary structure is reasonable, their salary management is strict and efficiently supervised. Statistics showed the average annual salary of executives at centrally administered SOEs ranged from 650,000 to 700,000 yuan in 2010 and 2011. These salaries were significantly higher than ordinary employees and those of government civil servants, state-run Xinhua news agency reported.

In addition to high salaries, many top executives at major SOEs carry a vice-ministerial or ministerial-level ranking that brings them so-called "invisible income" such as transportation and communication allowances and other material benefits. The salary reform was part of a broader reform plan in the SOE sector which has cantered on bringing in private capital to foster modern governance systems and develop a mixed- ownership economy. Xi's call to slash salaries was part of his campaign against corruption and austerity which struck a chord with people and partly improved the sagging image of the CPC. He has already launched major anti-corruption and austerity drive in the CPC and the military in which several high level serving and retired officials faced investigations.




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