As China shifts its focus from finance to technology, the ripple effects are profound and far-reaching.
In a commencement speech that unexpectedly went viral, Professor Li Feng of the Shanghai Advanced Institute of Finance (SAIF) told graduates that financial workers should not be ashamed of their careers. His words resonated deeply, underscoring a growing sentiment in China: the golden age of high-flying financial careers is fading. The speech’s viral spread highlighted a broader reality — China’s financial industry is undergoing profound changes as the nation shifts its priorities.
At the heart of this transformation is Xi Jinping’s vision for China’s future, which has fundamentally reshaped the country’s economic landscape. Xi’s doctrine of “common prosperity” seeks to foster a more equitable society by reducing the wealth gap and curbing the excesses of the elite. The financial sector, long seen as a symbol of opulence and inequality, has become a prime target of this philosophy.
Xi’s anti-corruption crackdown has been a hallmark of his tenure, aimed at purging the financial industry of its most egregious excesses. High-profile investigations and arrests of financial executives have become routine, signaling the government’s resolve to root out corruption and enforce stricter regulatory oversight. But this crackdown is more than just a fight against corruption; it’s a tool for tightening control over the sector and realigning China’s economic priorities.
In tandem with these measures, Beijing has introduced salary caps for financial professionals in state-backed institutions. The 3 million yuan (approximately $412,460) annual salary limit is part of a broader campaign to address income disparity and discourage the hedonistic lifestyles that have become synonymous with the financial elite. This policy, applied retroactively, requires professionals who exceeded this limit in previous years to return the excess. The message is clear: financial gain should not come at the expense of societal equity.
China International Capital Corp. (CICC), once a beacon of Beijing’s financial ambitions, exemplifies this transformation. Founded during a period of rapid economic reform, CICC aspired to compete with global financial giants. However, under the current regulatory environment, the bank has undergone a significant ideological and operational shift. A growing number of CICC bankers are now members of the Chinese Communist Party (CCP), reflecting the new political realities of China’s financial sector.
The emphasis on party loyalty has transformed CICC’s corporate culture. Long hours and high salaries, once hallmarks of the bank, have given way to a focus on political loyalty and adherence to party directives. This shift has had profound implications for employee morale. Pay cuts, reduced bonuses, and increasing regulatory scrutiny have dampened the once high-flying spirit of the institution.
The broader business environment for CICC has also become more challenging. The bank’s financial performance has suffered, with declining profits and market share in key areas such as initial public offerings (IPOs) and cross-border deals. The ideological shift, combined with tighter regulatory controls, has made it difficult for CICC to compete on the same terms as it once did.
The human cost of these changes is stark. The recent rumored suicide of a young CICC analyst has brought the pressures facing financial professionals into sharp relief. Amid widespread layoffs and pay cuts, the burdens of maintaining a high-cost lifestyle have become unbearable for many. This tragic incident highlights the broader strain on individuals navigating the industry’s transformation.
Young professionals who entered the industry with high expectations now find themselves in a stressful environment marked by financial strain, job insecurity, and intense work demands. The dream of a lucrative and stable career in finance has turned into a challenging and uncertain reality.
While the financial industry grapples with these new realities, another sector is quietly ascending. China’s tech industry, particularly the burgeoning field of artificial intelligence (AI), is becoming the new darling of the national economy. In the second quarter of 2024, AI jobs saw significant salary growth, outpacing traditional high-paying positions in finance. This shift is not accidental but rather a strategic realignment of national priorities.
Xi Jinping’s vision for China places a premium on technological self-sufficiency and innovation. Amidst growing geopolitical tensions and trade barriers, particularly with the United States, Beijing has recognized the need to develop its own technological capabilities. The government’s substantial investment in the tech sector aims to reduce dependence on foreign technology and build a robust domestic tech ecosystem.
Xi’s prioritization of technology over finance stems from his belief that long-term national strength and stability depend on the “real” economy — encompassing technology and advanced manufacturing — rather than the illusory economy of financial services, which he perceives as giving a false impression of prosperity and growth. The latter has been prone to hollowing out the economy and causing upheavals, as seen in the 2008 Financial Crisis. This conviction is evident in the significant resources being funneled into tech startups, AI research, and other high-tech fields.
The rapid downgrading of the financial industry, driven by political mandates rather than market forces, can destabilize the sector swiftly, creating a ripple effect that goes beyond mere economic restructuring. The human costs are profound, as the suicide of the young CICC analyst tragically illustrates.
As China continues to evolve under Xi’s vision, the financial industry must navigate a precarious path. The broader implications of these changes extend beyond finance, reflecting a national development strategy that prioritizes growth, technological advancement, and social equity — objectives that can be rapidly implemented given the central leadership’s unchecked power. While shifting national priorities and the rise and fall of high-paying sectors are natural, China must balance the drive for technological innovation with the need to support those who have been the backbone of traditional sectors. The true cost of this transformation may only become fully apparent as the country grapples with the fallout of its ambitious realignment.
