Exploitation by Europeans and Americans Gives the Chinese a Hard Time

In 2010, the issue of the Chinese fund sources remains a great concern against the backdrop of financial crisis. Currently, two interesting phenomena arise. One of these phenomena is that China has become the world’s second largest luxuries consumer. The re-emergence of the shortage of workers during the financial crisis is the other phenomena observed. It is a case of “the world’s second largest luxuries consumer” versus the fact that its 2009 expenditure only represented 29 percent of the nation’s GDP. According to this figure, China is, in effect, severely inadequate in consumption.

This is due to the utter poverty of the Chinese. Take, for example, the average per capita income. Germany has the highest average hourly per capita income of about $30. China is even worse than Thailand because the average hourly per capita income of Thailand is about $2, whereas China has the lowest average per capita income of $0.8. Even though this is the case, the Chinese top the list of longest working hours in the world with an average of 2,200 hours annually! The Americans work 1610 hours whereas the Dutch work only 1389 hours, which is the lowest. Globally speaking, the Chinese receive the least pay but they work the most hours.

After the financial crisis, a shortage of workers again happened in the Pearl River Delta (Zhushanjiao). This is not merely due to an increase of the request, but rather the workers’ discontentment of their pay. During the past decade, there was hardly any change in the income in Dongguan, but the inflation was increasing tremendously, which results in agricultural migrant workers becoming poorer and poorer. Commoners went on laboring for just bare subsistence. What about the entrepreneurs? They too faced the same problems. Many entrepreneurs said that they were actually laboring for the workers as they work hard every day late into the night. Therefore, whether it is the entrepreneurs or the workers, they all had a hard time making a living. Why it is that such labor was rewarded with the lowest pay in the world? According to my analysis, there are two reasons as to why this is the case.

First, we are exploited by the Europeans and the Americans. Some scholars used to say that a low profit margin in China is a result of lack of core technology in the traditional labor intensive industry, and the solution is shifting to the high technology business. This is nonsense. Personally, I am not against high technology. However, why is the profit margin of the labor intensive industry so low? Is it really because it is traditional and lacks core technology? Not at all. Take, for example, the toy industry in Dongguan. The profit margin of the Chinese toy industry is near zero, but the American toy company Mattel had a profit margin of over 40 percent in 2007. Mattel doesn’t manufacture. Rather, it governs all other aspects of the enterprise (excluding manufacturing), such as product design, raw material purchasing, storage and shipping, handling requests, wholesale and retail. Hence, Mattel controls the pricing rights. While Mattel gives Chinese manufacturers the profit of 10 cents per toy, it earns $3.60.

Now consider the production costs of the factories. Again, take, for example, the toy factory. When purchasing the needed raw materials, you will find out that the pricing right is again in the hands of someone else. The pricing right of the raw materials is controlled by Wall Street whereas that of the products is controlled by a company such as Mattel. Hence, the manufacturing in China is sandwiched in between them. I nicknamed Mattel the “Industry Capitalist” and Wall Street the “Financial Capitalist.” Hence, the manufacturing in China was as if surrounded by a wolf in the front and a tiger at the back. The “Industry Capitalist” is the wolf and the “Financial Capitalist” is the tiger. To be more precise, when we purchase the raw materials, the “Financial Capitalist” controls our price; on the other hand, when we merchandise the products, the “Industry Capitalist” controls our price. In light of this, we are utterly exploited by them.

Why, however, would the European countries let China do the manufacturing? This is because the manufacturing industry will cause environmental pollution and a waste of resources. They would certainly not want to deal with such a mess. Therefore, they control everything in the process except for manufacturing. By means of the “Financial Capitalist” and the “Industry Capitalist,” the Europeans and the Americans control the pricing rights of the raw materials and of the merchandise and let China handle the manufacturing part. In light of this, the more China manufactures, the richer the Europeans will become.

One more thing worth considering is that, compared with other countries, say, India, we are still the ones being exploited. How it is that we are worse than them? Here is the second reason. In the last few years, China’s industry policy has been flawed. A great amount of the resources have been used for bridges and highways. This results in the GDP annual growth rate of mere 10 percent. This growth does not mean that the Chinese economy has any remarkable growth whatsoever. What really affects the GDP is the reinforced concrete industry. For instance, when a certain local government demolishes the homes of the farmers and makes them build houses on allotted government property, these farmers spend their $100,000 in reinforced concrete. This money could otherwise be spent to improve other industries. Therefore, the more reinforced concrete is used, the poorer people will become.

The author is a professor at the Chinese University of Hong Kong and has a book entitled “Hsien-Ping Lang Says: Why Are We Having a Hard Time”