[Editor’s Note: On September 20, celebrity financial expert Larry Hsien Ping Lang (郎咸平), now a professor of finance at The Chinese University of Hong Kong, wrote an essay for the Chinese-language Global Times in which he asked why Chinese continue to earn low wages in exchange for the world’s most grueling work hours, with wages largely stagnant for ten years. The first of his two answers is China’s exploitation at the hands of a selfish West. “The first reason,” he writes, “is our exploitation by Europe and America.” Lang’s arguments have, as has often been the case with his writings, sparked lively debate in China over the causes of the country’s stagnant standards of living. Su Zhenhua (苏振华) asked earlier this month: “Does Lang Xianping not understand, or just not wish to understand?” The following editorial is one of the most recent return volleys, this time from Guo Yukuan (郭宇宽), a veteran journalist and one of China’s most interesting columnists.]

Lang Xianping and the Strange Logic of his ‘Theory of Exploitation’
Guo Yukuan (郭宇宽)
October 20, 2010

Larry Hsien Ping Lang (郎咸平) is at it again. In a recent essay for the Global Times called, “European and American Exploitation Makes Life Tough for Chinese,” Mr. Lang writes of how Chinese live pitiable lives, and he places the blame for this on Westerners, who are, he says, out to exploit us.

He writes: “Take, for example, average wages. Average hourly wages in Germany are the highest, at about 30 US dollars an hour. China falls behind even Thailand, where wages are around 2 US dollars. In China the average is 80 cents an hour, coming last in the world. While Chinese wages come last in the world, Chinese work more hours than people in any other country, on average 2,200 hours a year. Americans work around 1,610 hours a year, and Holland is the lowest, with just 1,389 hours a year. Workers in China earn the lowest wages in the world, but work longer than the rest of the world.”

After laying out these facts, which are likely to resonate with many Chinese, Lang poses the tough question of why things should be this way. “Whether we’re talking about China’s entrepreneurs or its workers, everyone has it hard,” he says. “Why, then, do we earn the world’s lowest wages when we work harder than the rest of the world?”

Lang finds his answer in “our exploitation at the hands of Europe and America.”

Larry Hsien Ping Lang habitually highlights the originality of his arguments, and he once again does so here. He writes: “Many scholars argue as a matter of habit that China’s labor-intensive industries have low profit margins because they lack core technologies, and that solving the problem of low profit margins means transitioning into high-tech enterprises. This is just a tall tale. Is it really because traditional labor-intensive industries lack core technology? No, it is not.”

Then comes his curious argument: “Look at toy manufacturing in Dongguan, for example. Profit margins in China’s toy industry approach zero. But profit margins for American toy companies were higher than 40 percent in 2007. Mattel does not do manufacturing, but controls the rest of the entire industry chain instead, encompassing product design, raw material procurement, warehousing and transport, handling of orders, wholesaling and retailing. As a result, Mattel controls the pricing power. Mattel allows Chinese toy manufacturers just fractional cents of the profit, while earning 3.6 dollars per item itself.”

Pardon me, but isn’t this contrast between Mattel, which holds core brands and technologies, and labor-intensive Dongguan toy manufacturers sufficient itself to show that if you don’t possess critical intellectual property you can expect very low profits?

Larry Hsien Ping Lang fails to apply even the most basic logic to this simple issue. Chinese people aren’t intellectually stupid, so why is it that China can only fiddle around with its property market, the government selling off the land at a profit while ordinary Chinese toil away in low-paying jobs? And why is it that Europe and America have been able to develop knowledge based economies? Supposing local governments have monopolistic control over the bulk of local resources, which is the case in China, and that they profit simply by selling off land. What incentive do these local governments have to develop an environment that fosters innovation and a knowledge based economy?

Following this line of thought further, suppose the same regions have no protections for intellectual property, and that any and all products designed can easily be stolen and imitated by others. What choice do people in these places have other than working their fingers to the bone?

Larry Hsien Ping Lang never addresses these very basic questions.

Having read Lang’s work often enough, I have a sense for how he works. First of all, he tells Chinese they are poor, tired and pitiable, and this gives him some degree of influence among the ordinary masses — they feel he’s someone who dares tell it like it is. Next, he argues that the system in mainland China is great — better than India, better than the Philippines, and better than Africa. Third, he asks how it is that Chinese can live such tough lives under such an excellent system. The answer he comes up with is that we are exploited by Americans and Europeans.

Lang is routinely invited to deliver reports or lectures to this or that local government or property developer in China. A top notch economist, and he harps on the point of just how fabulous our system is in mainland China. Don’t Chinese know just how good they have it? The only problem is our ruthless exploitation at the hands of the West. So if we want to complain, he suggests, we should turn the finger of blame on Old America and Old England.

Larry Hsien Ping Lang insists it is a form of exploitation when Mattel makes 3.6 dollars on every toy and Chinese companies get only a fraction of that. I wonder if Mr. Lang realizes that every time he pockets one of his substantial “lecture fees” it is like all of those pitiable Chinese workers are the ones paying up. And has Lang ever considered this might be a form of exploitation?