5 - The Traditional Practice of Bankers’ Remuneration and Incentives in China

Summary

This chapter describes and analyses the traditional way adopted by Chinese banks to manage and incentivise bankers in the context of state ownership and intervention. It provides an overview of the modernisation reform of Chinese banks and argues that the essential factor that contributed to the successful reform was the predominant role of the state. The governance of banks was subject to state intervention, and bankers were identified and managed as state cadres. Therefore, bankers’ remuneration was administratively managed, and bankers were incentivised with the opportunity of political promotion. Reciprocally, the administration of remuneration and political incentives acted as a channel for state intervention in banks. However, this administrative and politicised approach was inconsistent with the principles of modern corporate governance, and reform to push forward the modernisation of bankers’ remuneration was considered necessary.