Chinese authorities have asked state-owned financial institutions to cut salaries to accelerate returns as the Covid-19 pandemic slows the country’s economy, Bloomberg reported.

China’s sovereign wealth fund, the biggest bank, and investment conglomerate have been urged to limit the pay of executives.

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The pay cuts can reach an average of 30% among some companies and will vary based on a formula, the report added citing people familiar with the matter.

The report added that financial institutions were first informed about the need to slash salaries last year and were given details on how to make those cuts in early this year.

However, the implementation of this plan has not been uniform and the finance ministry has begun pressuring the firms to make the cuts.

The move could bring more money to the government for stimulus and force its $41trn banking system to support economic recovery.

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The finance ministry has asked the $940bn sovereign wealth fund China Investment Corp (CIC), China Development Bank, Citic Group, and ICBC to adjust the salaries.

ICBC has also been asked to let go CNY1.5trn ($200bn) in earnings this year and defer trillions in bad loans to SMEs, Bloomberg reported.

The formula devised by the ministry to cut employees’ salaries is based on a number of performance indicators.

The Bloomberg report added that the companies are encouraged to continue hiring while offering the original compensation.

It is expected that the pay cuts will majorly affect bankers residing in Hong Kong as they have to pay mainland taxes which can be as high as 45%, as against the 15% city tax rate.