Wall Street caught between US investment screening and Xi's common prosperity, China threatens countermeasures over US Taiwan policy overhaul & USDOS creates “China House” -- China Boss News 6.20.22
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Wall Street caught between outbound investment screening and common prosperity
“China's securities regulator on Tuesday denied that it and its securities association had asked foreign investment banks for senior executives' pay details or suggested they implement pay curbs, rejecting media reports,” Reuters reported.
Reuters:
Bloomberg reported on Friday that Chinese regulators had warned top global banks, during meetings in Shanghai and Beijing this year, against paying their top bankers in China lavishly.
"The reports are not factual," the China Securities Regulatory Commission (CSRC) said in a statement, adding that no such meetings were held
CSRC’s statement followed Bloomberg’s reveal that “Credit Suisse Group AG, Goldman Sachs Group Inc. and UBS Group AG [are required] to report details on how they compensate their top bankers.”
The Financial Times also published a story on the meeting which it framed as an effort “to rein in executive pay levels, in the latest sign that president Xi Jinping’s drive to promote ‘common prosperity’ is gathering pace ahead of a crucial Communist party congress this year.”
FT:
The regulators’ instructions to financial industry representatives, which were first reported by Bloomberg, marked the latest efforts by Xi’s administration to constrain the sector.
A senior investment banker based in Shanghai who asked not to be identified said that pay, bonuses and other incentives should be regarded as financial institutions’ “internal affairs”.
“There’s no need for regulatory authorities to control [them],” the banker said, adding that “the only thing the authorities need to do is impose penalties for wrongdoing”.
In a recent edition of Next China, Bloomberg’s China-themed newsletter, business analysts questioned how top investment banks could continue to “lure and retain top talent” if Beijing forced them to cap bonuses.
“Next China: Wall Street’s Dead End,” Bloomberg:
On pay, a first-year managing director at a Chinese broker can get about 4 million yuan ($600,000) in compensation. The bulge bracket Wall Street firms offer is 10-20% greater, while second-tier foreign banks struggle to match it, says Eric Zhu, head of financial services recruitment at Morgan McKinley. Senior bankers at local firms, which dominate deal making, can take home well above 10 million yuan, which foreign firms have a hard time matching, according to local headhunters.
The pressure over pay in China comes as firms are also feeling squeezed by an effort to review outbound investments in the U.S. On Monday, a bipartisan group of House and Senate lawmakers "propos[ed] a new compromise for government screening of American investments in China as part of a pending economic competitiveness bill aimed at confronting Beijing,” Politico said.
Politico:
The discussion draft would set up a new federal oversight panel with the authority to review and potentially deny new American investments in China or other adversarial nations over national security concerns, according to text of the draft reviewed by POLITICO and first reported by the Wall Street Journal. It would also force American investors and firms to disclose new investments in certain Chinese sectors, such as semiconductors, batteries and pharmaceuticals.
“The legislation aims to give the U.S. government greater visibility into U.S. investments,” Reuters staff added. If the draft proposal is passed without further changes, it “will be mandatory to notify the government of investments that may fall under the new regulations, and the U.S. can use existing authorities to stop investments, or mitigate risk,” the news agency said.
For Reuters’ update, China regulator denies it asked foreign banks for executive pay details, click here. For Bloomberg’s newsletter, Next China: Wall Street’s Dead End, click here. For the rest of Bloomberg’s report, Wall Street’s China Problems Multiply With Warning on Banker Pay, click here. For Financial Times’ report, China tells banks to limit executive pay under ‘common prosperity’ drive, click here.
For Gavin Bade’s report in Politico, Lawmakers push new compromise for screening American investments in China, click here. For Reuters’ analysis, China investment curbs gain momentum in U.S. lawmaker talks, click here.
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China threatens countermeasures against effort to overhaul US Taiwan policy
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