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China's Bank of Communications to cut top executives' pay: memo

[SHANGHAI] Bank of Communications , China's fifth-largest bank, will"significantly" cut the pay of its senior executives and tie larger portions of all employees' pay to performance, according to an internal document seen by Reuters.

Beijing has been pushing for pay reforms at China's sprawling state-owned enterprises, which have often come under fire for inefficiency and a lack of innovation, as well as uneven pay structures that favour the most senior executives.

The internal memo, circulated to employees on Dec 31, said the reforms, which would include ending fixed payments for living expenses and instead make those payments purely performance-based, would be "a difficult but important" reform and "important to implementing market-based mechanisms".

Many big Chinese companies pay a fixed salary and fixed subsidies for certain living expenses such as rent and education fees, as well as performance-based bonuses.

A BoCom spokeswoman said the bank was not cutting the fixed portion of employees' pay but added: "The central government has provided an opinion on manager pay so our bank is implementing the rules." She gave no further comment and declined to confirm or deny the existence of the memo.

The bank said in August last year that it was mulling stock incentives for its management, under reforms Beijing is pushing to invigorate state-owned enterprises by putting more of their equity into the hands of the private sector .

The official China National Radio reported last week that senior executives at large state enterprises, including banks, would face pay cuts in January under a series of government pay reforms proposed in August.

Despite criticisms, including from China President Xi Jinping, that state enterprises' top executives are overpaid, official pay scales for high-level Chinese banking officials are well below those of their global peers.

Jiang Jianqing, the chairman of Industrial & Commercial Bank of China , took home around US$326,000 in salary, bonus and benefits according to the bank's 2013 annual report, while Wells Fargo & Co Chief Executive Officer John Stumpf earned US$19.3 million in 2013, a filing with the US Securities and Exchange Commission showed.

In the globally competitive investment banking sector, where institutions face pressure to vie for talent with Wall Street, Chinese salaries appear instead to be moving higher: China's investment banks awarded pay rises this year for the first time since the financial crisis.