In order to reduce expenses and comply with Beijing's request to reduce inequality of income in the financial industry, China's CITIC Securities plans to transfer numbers of bankers working at CLSA in Hong Kong, its offshore platform to the mainland, according to sources with knowledge of the situation.
Three sources claimed that CLSA will probably ask investment bankers to relocate to Chinese mainland with pay reduced to the local level or potentially face the risk of losing their current jobs, which would be an extremely sweeping move for a field where personal relocations happen more common.
According to one of the persons, CITIC, the leading investment bank in China based on market value, is attempting to reduce costs in its offshore division as dealmaking falters.
Weeks after decreasing base pay for mainland employees by up to 15% throughout the company's banking sector, CITIC made the move.
As state-owned businesses implement austerity measures in response to Beijing's "common prosperity" endeavor, China's well-heeled dealmakers have seen pay reductions and benefits curtailed across the financial industry.
According to the businesses' annual filings, the average salary for CITIC's mainland employees last year was 840,000 yuan, or about $117,107.45, making it the highest among all Chinese investment banks.
A "single-digit" number of employees in the investment banking section could be affected by the first batch of CLSA employees scheduled for relocation based on the performance appraisal, according to one of the sources, who predicted that a decision would be made as soon as this week.
Later rounds are probably going to touch more people, the source continued.
In the long run, over 30% of the 200 people employed by CLSA in investment banking in Hong Kong may accept the offer, another person said, adding that the proposal was subject to subsequent adjustments.
The second source also noted that among those who are most likely to be impacted will be over 80 dealmakers that serve in execution and cover roles related to CLSA's deals on the mainland, and many of them often travel there.
Since dealmakers working in Hong Kong are often paid more than their counterparts on the mainland, the move could end up with a 25 to 50 percent base salary cut.
Beijing has intensified its campaign to eliminate the opulent lifestyles of the wealthy in the nation's $57 trillion financial industry as economic growth slows and youth unemployment hits an all-time high.
One piece of requirement given to bankers is to limit their travel and entertainment spending, as well as refrain from dressing up or wearing expensive watches.
A difficult market environment has affected dealmaking and trading income for CITIC as well as its Chinese and international competitors. Over the past year, Wall Street institutions including Goldman Sachs, JPMorgan, and Morgan Stanley have eliminated certain positions in China's investment banking industry.
When it was first established in 1986 by former journalists from Australia and Canada, CLSA was well-known for being a significant employer of expats in Hong Kong. However, in the years after CITIC bought the bank in 2013, many of those employees left.