The Ministry of Finance has imposed a pay cap for top executives at state-owned financial institutions as the financial crisis eroded earnings of such companies in 2008, the ministry said Thursday in a circular on its website.

The new rule, which came out amid rising public grumbles about huge pay packages for top executives at state-owned financial companies, outlined the basic line that pay for executives in 2008 should be no more than 90 percent of the level in 2007.

As of 9 p.m., two hours and half after the news was posted on the web Sina.com.cn, 584 netizens made comments. Nearly all of them were supportive of the move.

Under the plan, pay refers to pre-tax income, including salary, bonus, and social insurance.

The rule would enhance equal income distribution and push forward reform in pay mechanism, according to the ministry.

The circular said it was in line with the current domestic and international situation for executives at some state-owned financial institutions to voluntarily cut their pay despite their companies posted rising profits.

Companies which had a declining income last year should slash another 10 percent based on the basic line. Reductions should be deeper if companies suffered steep drop in profits, according to the circular.

The ministry demanded to narrow pay gap among executives at companies in the financial sector, calling for bigger cuts for those who received much higher pay than the average in 2007. Caps were also urged to be imposed on pay for staff at financial companies to make a clear difference in posts and performance.

It is the second time that MOF had set such pay limits. In an earlier circular in February this year, MOF ordered that the 2008 salary for top executives of state-owned financial institutions should be limited within 2.8 million yuan (about $410,000).

The new move aimed at avoiding salary competition between some financial institutions when deciding the salaries for their executives in 2008, said Guo Tianyong, a professor at the China Central Finance University.

It is necessary to put a cap on executive salaries to prevent unfair distribution of income and a larger gap between the rich and poor, he said.

In March, the government ordered a crackdown on government "hospitality" budgets, including a 15-per-cent cut in car-buying and fuel funds as well as an across-the-board halt to the building of any new office compounds before the end of 2010.

Chinese Premier Wen Jiabao said the government should take the leading role in promoting frugality and should ensure government spending goes where it is most needed amid the economic crisis.

(Xinhua News Agency April 9, 2009)