(Bloomberg) -- JD.com Inc. is slashing salaries for about 2,000 managers by 10% to 20% and diverting some of those savings toward a $1.4 billion employee benefits fund, aligning China’s No. 2 online retailer with Xi Jinping’s “common prosperity” campaign to share the wealth.
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Billionaire JD.com founder Richard Liu will donate 100 million yuan ($14 million) of his own money toward staff welfare, a person familiar with the matter said. China’s largest online retailer after Alibaba Group Holding Ltd. will also set up a 10 billion yuan fund to provide staff with interest-free home loans, the person added, asking not to be identified because it hasn’t been publicized.
The moves emerged weeks after Xi reiterated a drive toward common prosperity, a concept that -- twinned with a sweeping crackdown on powerful internet firms -- roiled markets in 2021 by pushing business leaders and cash-rich companies to explore ways to re-distribute wealth. That effort receded from public view as Beijing sought stability in the run-up to the October Party Congress, where Xi secured a precedent-busting third term.
“I hope this move can realize the dream of securing a house for all employees who have worked for more than five years, including for our courier and customer service brothers,” Liu announced in an internal memo seen by Bloomberg News.
Xi is now expected to revitalize one of his signature policies, with uncertain outcomes for investors and China’s largest corporations. Beyond JD, senior executives across China’s $58 trillion financial system are also facing additional pay cuts as firms from investment banks to mutual funds weigh options to comply with Xi’s mantra.
JD’s shares fell more than 4% while rivals from Alibaba to Tencent Holdings Ltd. extended losses to slide more than 2% in Hong Kong.
“This corresponds with the common prosperity campaign and provides justification for management’s salary cut, as Chinese tech companies continue to cut cost to improve financials this year,” said Willer Chen, an analyst at Forsyth Barr Asia Ltd.
Read more: China Bankers Face Deeper Pay Cuts in ‘Common Prosperity’ Push
A JD.com spokesperson confirmed the contents of the memo, which was first reported by Chinese online media.
Under the common prosperity campaign, Xi’s administration sought to rein in “disorderly expansion of capital.” In response, wealthy tech entrepreneurs like Liu began giving back.
Pinduoduo Inc., the fast-rising online commerce giant challenging Alibaba in the countryside, last year pledged its next $1.5 billion in profit to farmers’ welfare. Tencent said it will double the amount of money allocated toward social responsibility programs to about $15 billion. And Alibaba promised to commit 100 billion yuan over five years to support small companies. Meanwhile, tech billionaires from PDD’s Colin Huang to ByteDance Ltd.’s Zhang Yiming and Xiaomi Corp.’s Lei Jun donated vast sums to a plethora of causes.
JD’s salary cuts follow a wave of job and cost reductions worldwide by companies struggling with a potential recession. The Chinese firm, which like Alibaba weathered two years of strict Covid controls that precipitated a downturn, last week reported an 11% rise in quarterly revenue. It’s riding out the slowdown better than Alibaba, the target of a bruising antitrust crackdown in 2021.
“Cost-cutting measures have been a common theme for China tech profitability amid flattish sale growth and Covid impact on consumption,” Bloomberg Intelligence Strategist Marvin Chen said. “Layoffs and salary reduction may continue until there is more clarity on reopening.”
Liu stepped down this year as JD’s chief executive officer, joining other tech tycoons that exited top management roles after the internet crackdown. The entrepreneur will focus on longer-term strategies while mentoring younger management, JD said at the time. He would also contribute to the revitalization of rural China, the firm said, a priority of Xi’s.
Liu in October settled a lawsuit filed by a student in Minnesota who accused him of rape in 2018. The case, which drew international attention to gender rights in China, helped contribute to his gradual retreat from the helm of the company he founded in 1998. The donation he unveiled Tuesday will go toward a children’s relief fund, according to the memo.
Read more: JD’s Founder Steps Down as CEO of $92 Billion Empire
--With assistance from Charlotte Yang and Abhishek Vishnoi.
(Updates with analysts’ comments and share action from the sixth paragraph)
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