China Fund Managers Face Salary Cuts for Underperformance

China's securities regulator is set to introduce strict pay regulations for fund managers, enforcing salary reductions of up to 50% for those failing to meet performance benchmarks. The move is part of broader efforts to enhance accountability and align investor interests in the country’s $4.6 trillion mutual fund industry.

Performance-Based Pay Cuts

Under the proposed rules, fund managers will see compensation linked directly to investment performance. If a fund’s returns fall significantly below industry benchmarks or record losses, the manager’s salary could be cut in half. The measure aims to curb excessive risk-taking and encourage more sustainable, long-term investment strategies.

Strengthening Investor Confidence

The reforms come as China’s stock market faces volatility, with many retail investors growing skeptical of the fund industry's ability to deliver stable returns. The China Securities Regulatory Commission (CSRC) is pushing for a new evaluation system, where fund performance will carry more weight than factors like firm size or market influence.

Alignment with Economic Reforms

This initiative aligns with China’s broader “common prosperity” campaign, which seeks to narrow income disparities and promote responsible financial management. Earlier this year, authorities also capped annual salaries at state-owned financial firms, reinforcing efforts to regulate excessive executive compensation.

Impact on the Mutual Fund Industry

China’s mutual fund sector, one of the world’s largest, has attracted global asset managers but has struggled with inconsistent performance. The new rules could reshape the industry, putting greater pressure on fund managers to improve returns while limiting risky speculation.

While the CSRC has yet to finalize the proposal, the policy signals China’s increasing oversight in financial markets, aiming to build a more disciplined and investor-friendly mutual fund landscape.