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China’s Exclusive CITIC to relocate dozens of Hong Kong bankers to the mainland to cut costs -source By Reuters

© Reuters. FILE PHOTO: The logo of CITIC Securities is seen on its branch in Beijing, China, March 22, 2016. REUTERS/Kim Kyung-Hoon

By Selena Li and Xie Yu

HONG KONG (Reuters) – China’s CITIC Securities plans to move dozens of bankers from its CLSA offshore platform in Hong Kong to the mainland to cut costs and meet Beijing’s call to bridge income inequality in the financial sector, people familiar with the matter said.

In an unusually broad move for an industry where relocation of individuals is more common, CLSA is expected to demand that investment bankers move to the mainland with their salaries lowered to local levels or face possible loss of their jobs, three people said.

They declined to be named because they were not authorized to speak to the media.

CLSA declined to comment. CITIC did not answer Reuters questions.

CITIC, China’s top investment bank by market value, is pushing for cost-cutting in its offshore arm as deals stall, one of the people said.

The move comes weeks after CITIC cut pay across its investment banking division, lowering the base salary of land-based bankers by up to 15%.

Wealthy financial deal makers in China have seen wage and benefit cuts across sectors as their state-owned employers respond to Beijing’s “shared prosperity” push with austerity measures.

Employee pay for mainland CITIC staff was the highest of any investment bank in China last year, according to the company’s annual disclosures, reaching an average of 840,000 yuan ($117,107.45) per head.

The first wave of CLSA staff marked for relocation is expected to be decided as early as this week, with figures around “single digits” in the investment banking division affected based on performance appraisals, the first person said.

More may be affected in later rounds, the person added.

In the longer term, more than 30% of CLSA’s 200 investment banking workforce in Hong Kong could accept the offer, a second person said, adding that plans could change further.

More than 80 dealmakers who have execution and coverage roles for the China CLSA deal, most of whom frequently travel to the mainland, are among those most likely to be affected, the second person added.

The move would result in a reduction in base wages of 25% to 50% as dealmakers in Hong Kong are typically offered higher wages than their mainland counterparts, according to a second person.

With economic growth slowing and youth unemployment hitting record highs, Beijing has stepped up its campaign to stamp out the luxury lifestyle of the elite in the country’s $57 trillion financial sector.

Bankers have been told not to wear expensive clothes and watches at work and to control travel and entertainment expenses.

CITIC and its counterparts in China and globally are also facing a challenging market environment weighing on trade deals and revenue. Wall Street banks such as Goldman Sachs (NYSE:), JPMorgan (NYSE:) and Morgan Stanley (NYSE:) have cut some investment banking jobs in China over the past 12 months.

CLSA, founded by former Australian and Canadian journalists in 1986, was once known as a large employer of expatriates in Hong Kong, but lost much of its staff in the years following CITIC’s purchase of the bank in 2013.

($1 = 7.1729 renminbi)

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