"Cutting Executive Salaries to Boost Welfare for Lower Ranks"... China's Private Sector Accelerates 'Gongtong Buyu'

JD Group Cuts Executive Salaries by 10-20%
Conversion of Non-Regular Workers to Regular Employees and Payment of Housing Pension

[Image source=AP Yonhap News]

[Asia Economy Beijing=Special Correspondent Kim Hyunjung] The representative national governance philosophy of Chinese President Xi Jinping, 'Common Prosperity,' is rapidly spreading among local private enterprises. Companies are adopting a compliant stance toward government policies while trying to respond to various regulations and pressures.

According to local media such as China Securities Journal on the 22nd, Liu Changdong, chairman of JD Group, China's second-largest online e-commerce company, recently sent a letter to employees stating that he would cut the salaries of senior executives to improve welfare for lower-level employees and establish a housing security fund. Liu said, "From January 1, 2023, the salaries of senior executives will be cut by 10-20%, with higher-ranking officials facing larger cuts." He also announced that he, as chairman, would donate an additional 100 million yuan and that some affiliates would contribute to expand the "Employee Children Support Fund."

Furthermore, he explained plans to convert non-regular workers at the logistics affiliate Debang Express, who are subcontracted workers, into regular employees and to pay their five major social insurances and housing provident fund. Debang, a local logistics company, became an affiliate of JD after JD acquired more than 50% of its shares at the end of July. The company had previously established a housing security fund worth 10 billion yuan for Debang employees, which operates as a revolving interest-free loan system to help employees purchase homes. Liu projected that the cumulative investment related to this would reach hundreds of billions of yuan over the next decade. In the letter, he emphasized, "I hope all employees who have worked for more than five years, including the Debang brothers, can realize their dream of owning a home."

Yan Yuejin, a researcher at E-House China, a Chinese real estate information provider, told Securities Journal, "Currently, many companies have similar employee housing finance support programs like JD," adding, "Supply and distribution are increasingly mentioned in solving workers' housing issues."

However, many point out that these welfare and wage system reforms are not voluntary movements but attempts to align management direction with the government's 'Common Prosperity' philosophy. Analysts suggest that companies are finding their own survival methods in response to the Chinese authorities' approach of tightening crackdowns and sanctions on private enterprises. Willer Chen, a researcher at investment firm Foresysba, explained to Bloomberg News, "This corresponds to the Common Prosperity campaign, and China's big tech companies are justifying cost-cutting and salary reductions this year to improve their finances."

In fact, earlier, Pinduoduo, an online commerce company rapidly rising as a challenger to Alibaba, promised $1.5 billion in revenue for farmers' welfare last year, and Tencent announced it would double the scale of its social responsibility program to $15 billion. Alibaba pledged to support small businesses with 100 billion yuan over five years.

According to an analysis by the Hong Kong South China Morning Post (SCMP) citing the '2022 Hurun China Philanthropy List' released by Hurun Research Institute, from April last year to August this year, there were 49 donors in China who donated more than 100 million yuan, with their total donations reaching $10 billion (approximately 13.3 trillion won).

Chairman Liu Changdong ranked first on this donation list as well. In February, through a U.S. stock market disclosure, he announced plans to donate 62.38 million common shares he holds to a third-party public welfare foundation. The donation amount is about $2.05 billion. The second-largest donor was Wang Xing, founder and CEO of food delivery platform Meituan, and third was Lei Jun, co-founder of Xiaomi, donating $2.03 billion and $2 billion respectively. Hurun stated, "Charitable trusts are becoming an important way to promote common prosperity and the development of philanthropy in China."

Marvin Chen, a strategist at Bloomberg Intelligence, explained, "Cost-cutting measures have been a common theme among China's big tech companies amid slowing revenue growth and the impact of COVID-19," adding, "Layoffs and salary cuts may continue."

This content was produced with the assistance of AI translation services.