China pushes austerity drive: Salaries for top executives to be pruned

Louis VettonIt’s time for high-flying pampered executives of China’s state-owned enterprises to take a reality check. Going by the latest commandment by China’s president Xi Jinping, “unreasonably high salaries” for executives will be now revised and subject to monitoring.

Addressing the central leading group for comprehensive deepening of reforms, the Chinese president said August 18 that the SOEs must make sure their salary level is proper, their salary structure reasonable and the salary management is strict and efficiently supervised. “Unreasonably high and excessive incomes must be regulated,” he said.

Barely four months after he took charge of the country, Xi imposed a form of austerity on the nation’s civil servants, military brass and provincial party leaders in which several leaders have faced investigations. The austerity programme has targeted almost everything from official cars to lavish banquets and even delicacies like shark fins and bird nests. The anti-corruption drive has focused on SOEs, which dominate the crucial economic sectors, including energy and resources. Previously, the top-executives of the state-run China National Petroleum Corp have been accused of “severe disciplinary violations”- a term used in China for corruption cases.

During the meeting, Xi also urged the SOE executives to realise their responsibilities and support the reform process. He reviewed the plan for the reform of payments for executives of major SOEs directly controlled by the central government and decided the plan had to be further amended. Xi further stressed that apart from the necessary expenses allowed by the financial and fiscal regulations, executives of the SOEs will enjoy no perks in the name of “entitled consumption”.

With Xi’s government coming to power, China has made significant progress in improved disclosure of government spending, but the overall performance still remains inadequate. There have been reports of government officials purchasing expensive Limousines and Bentleys to be used as government cars.

The potential pay cut for executives, known for conspicuous consumption and extravagant lifestyle, is meant to stem public outrage over excessive government spending. But more is required. The government needs to enhance fiscal transparency by implementing practices like the asset declaration laws for public officials and creation of institutions to restrain power of government officials, said Transparency International in a recent report.

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