Exclusive: Chinese fund manager requests staff to return excess pay from the past five years, sources say

By Julie Zhu and Selena Li

HONG KONG – A leading Chinese fund management company is asking its senior executives to return earnings received over the past five years that surpass a newly imposed pay cap, as part of a government initiative aimed at fostering economic equality, according to two sources familiar with the situation.

China Merchants Fund Management has requested that its executives repay any income exceeding the 3 million yuan ($421,330) limit that was established for each year from 2019 to 2023. The firm is wholly owned by China Merchants Group, one of China’s largest state-run conglomerates, and is managed by six executives, with an additional three managing subsidiaries.

Neither China Merchants Fund Management nor China Merchants Group provided comments on the matter when approached for clarity.

The capping of salaries and the recovery of excess pay reflect efforts among state-owned enterprises to comply with the government’s "common prosperity" initiative, which has been in effect since 2021. This initiative aims to combat social and economic inequality amid a slowdown in economic growth.

As part of this effort, authorities have been dissuading ostentatious lifestyles among the elite, with increased scrutiny on fund managers given their substantial profits during a period of poor stock market performance.

Earlier, reports indicated that China Merchants Fund Management had already asked some portfolio managers to return income that exceeded the 3 million yuan cap for the previous year. In June, the firm informed approximately 60 portfolio managers and senior executives about the pay reclamation process, beginning the collection of funds in July.

It remains uncertain whether the firm can seek repayments from former employees.

Another affiliate, Bosera Asset Management, which is partially owned by China Merchants Group, established a pay cap of 2.9 million yuan and has asked certain employees to return any excess earnings from last year.

At least two additional fund management companies have initiated policies for a five-year clawback period, primarily targeting senior management.

AUDITORS’ REVIEW

In the first half of this year, auditors from the National Audit Office conducted visits to China Merchants Fund Management and several other fund managers, reflecting increased oversight in the sector. These auditors determined that some salaries within these firms were excessively high and requested the implementation of pay caps and the recovery of excess funds, although it was not specified what actions were recommended for China Merchants Fund Management.

The National Audit Office has not commented on these visits.

The salary range for senior executives and department heads in sales and investment roles within Chinese fund management firms, according to a 2023 salary guide, is reported to be between 1.6 million yuan and 6 million yuan.