Banking Layoffs Continue in China as Salaries Slashed in First Half

China’s biggest banks have eliminated thousands of jobs in the past six months to June 2016, as the nation’s banking industry, despite avoiding the huge fines for compliance breaches that weighed on their Western peers, has seen a challenging year amid a sluggish economy, lower interest margins and top-down financial reforms.

Big banks in China have announced almost 1.62 million new job cuts this year, and thousands more are expected, as the wave of lay-offs that began in 2013 shows no sign of abating.

So far, 10 out of the 16 listed mainland banks have reported a headcount drop. The top six listed banks, which reported their weakest profit growth in a decade, have cut a combined total of 34,691 jobs in the first half of the year, the semi-annual reports of the banks showed. This marks the biggest scale of employee departure ever recorded in China’s banking sector, which has expanded uninterrupted over the past 10 years.

Salaries are also going down

According to several media reports, many banks have been easing staff for different reasons, with China Merchants Bank scaling back the most, cutting 10 per cent of its workforce. Bank of China said its headcount at the end of June 2016 had decreased by 6,881 to a total of 303,161 employees. Agricultural Bank, the nation’s biggest bank employer, lost 4,023 staff while Industrial and Commercial Bank of China cut back by 7,635. China Construction Bank also shed 6,721 staff to 362,462.

Besides a reduced number of workers, salaries are also going down as Chinese banks’ profits slid 3.5 per cent on the year, while the four state-owned banks reported profit growth below one per cent. In addition, the first-half data showed that Industrial and Commercial Bank of China, Agricultural Bank of China and China Construction Bank reduced their salary expenses, including salaries, bonuses, allowances and post-employment benefits, by 1.6 percent, 2.9 percent, and 2.18 percent respectively.

Compensation structures are generally different in Chinese banks compared to their Western peers. For example, the average annual income for a mid-level banker can typically range between $100,000 to $125,000 while similar international counterparts offer more than double those salaries. They also offer longer holidays and fewer travel curbs, while Chinese staff can only get five days annual leave and must request approval from authorities before being allowed travel abroad.