The Rate of Exploitation of Tencent (China) Workers

Introduction

I have tried to calculate the rate of exploitation of workers in various Canadian capitalist companies (see for example The Rate of Exploitation of the Workers of Rogers Communications Inc., One of the Largest Private Employers in Toronto or The Rate of Exploitation of the Workers of the Canadian Imperial Bank of Commerce (CIBC), One of the Largest Private Employers in Toronto and in Canada ). I think it is time to expand such calculations to capitalist emloyers in other countries and continents. To that end, I will try to calculate the rate of exploitation of workers for some of the largest capitalist employers in various continents.

One such large capitalist employer in Asia is Tencent, a Chinese technology company. Here are some more details about this capitalist employer. From its website ( https://www.tencent.com/en-us/about):

Tencent is a world-leading internet and technology company that develops innovative products and services to improve the quality of life of people around the world.

Founded in 1998 with its headquarters in Shenzhen, China, Tencent’s guiding principle is to use technology for good. Our communication and social services connect more than one billion people around the world, helping them to keep in touch with friends and family, access transportation, pay for daily necessities, and even be entertained.

Tencent also publishes some of the world’s most popular video games and other high-quality digital content, enriching interactive entertainment experiences for people around the globe.

Tencent also offers a range of services such as cloud computing, advertising, FinTech, and other enterprise services to support our clients’ digital transformation and business growth.

Tencent has been listed on the Stock Exchange of Hong Kong since 2004.

The Nature of the Rate of Exploitation

But what is the rate of exploitation? And why not use the usual rate of profit or the rate of return? The rate of profit is calculated as profit divided by investment. Since employers purchase both the means for work–buildings, computers, office supplies, raw material–and hire workers–we can classify investment into two categories: c, meaning constant capital, or the capital invested in commodities other than workers; and v, or variable capital, the capital invested in the hiring of workers for a certain period of time (wages, salaries and benefits).

The purpose of investment in a capitalist economy is to obtain more money (see The Money Circuit of Capital), and the additional money is surplus value when it is related to its source: workers working for more time than what they cost to produce themselves. The relation between surplus value and variable capital (or wages and salaries) is the rate of surplus value or the rate of exploitation, expressed as a ratio: s/v.

When the surplus is related to both c and v and expressed as a ratio, it is the rate of profit: s/(c+v).

In Marxian economics, you cannot simply use the economic classifications provided by employers and governments since such classifications often hide the nature of the social world in which we live. The rate of profit underestimates the rate of exploitation since the surplus value is related to total investment and not just to the workers. Furthermore, it makes the surplus value appear to derive from both constant capital and variable capital.

I decided to look at the annual report of some of the largest private companies in various cities in Canada if they are available in order to calculate the rate of exploitation at a more micro level than aggregate rates of surplus value at the national or international level. Politically, this is necessary since social democrats here in Toronto (and undoubtedly elsewhere) vaguely may refer to exploitation–while simultaneously and contradictorily referring to “decent work” and “fair contracts.” Calculating even approximately the rate of exploitation at a more micro level thus has political relevance.

I used data 2019 to calculate since the data for later years, due to the Covid pandemic, undoubtedly skewed the normal exploitation of Tencent workers. Perhpas once annual reports for 2024 have been published, it would be better to look at such rates of exploitation for that year since the pandemic’s effects may have diminished substantially by that time. 

Conclusions First

As usual, I start with the conclusion in order to make readily accessible the results of the calculations for those who are more interested in the results than in how to obtain them.

The Rate of Exploitation of Tencent Workers

Final Calculation (Based on Adjustments) of Surplus Value (Profit before income tax), Variable Capital (Employee benefit expenses) and the Rate of Exploitation or the Rate of Surplus Value 

Final Adjusted Surplus value or Profit (Income before income tax) 142,595[132,095+10,500=142,595]
Final Adjusted Variable Capital (V) (Employee benefit expenses)  [53,123-10,500=42,623]

To calculate the rate of exploitation or the rate of surplus value, we need to divide “Surplus value (s)” or “Income before income taxes” by “Variable capital (v) or Adjusted “Salaries and Benefits.”

So, with the adjustments in place, the rate of exploitation or the rate of surplus value=s/v=142,595/42,623=3.35=335%. 

This means that, in terms of money, $1 of wage or salary of a regular Tencent worker  results in $3.35 surplus value or profit for free.  Alternatively, for every hour worked, a Tencent worker works 201 minutes (or 3 hours 21 minutes) for free for Tencent. Or, within one hour of work, a worker receives an equivalent of her hourly wage in 14 minutes and works for free for 46 minutes for Tencent. 

In an 8-hour (480 minutes) working day, Tencent workers spend 110 minutes (1 hour 50 minutes) to obtain their wage for the day, and they spend 370 minutes (6 hours 10 minutes) in obtaining a surplus value or profit for Tencent.

In a 9-hour (540 minutes) working day, Tencent workers spend 124 minutes (2 hours 4 minutes) to obtain their wage for the day, and they spend 416 minutes (6 hours 56 minutes) in obtaining a surplus value or profit for Tencent.

In a 10-hour (600 minutes) working day, Tencent workers spend 138 minutes (2 hours 18 minutes) to obtain their wage for the day, and they spend 462 minutes (7 hours 42 minutes) in obtaining a surplus value or profit for Tencent.

In an 11-hour (660 minutes) working day, Tencent workers spend 152 minutes (2 hours 32 minutes) to obtain their wage for the day, and they spend 508 minutes (8 hours 28 minutes) in obtaining a surplus value or profit for Tencent.

In a 12-hour (720 minutes) working day, Tencent workers spend 166 minutes (2 hours 46 minutes) to obtain their wage for the day, and they spend 554 minutes (9 hours 14 minutes) in obtaining a surplus value or profit for Tencent.

In a 13-hour (780 minutes) working day, Tencent workers spend 179 minutes (2 hours 59 minutes) to obtain their wage for the day, and they spend 601 minutes (10 hours 1 minute) in obtaining a surplus value or profit for Tencent.

In a 14-hour (840 minutes) working day, Tencent workers spend 193 minutes (3 hours 13 minutes) to obtain their wage for the day, and they spend 647 minutes (10 hours 47 minutes) in obtaining a surplus value or profit for Tencent.

This is quite a high rate of exploitation relative to other rates of exploitation that I have calculated. 

Of course, those who argue that China is in some way socialist need to justify how it is that, on the one hand, Chinese workers are still exploited–and that at a very high level–and on the other hand that the process of production of Chinese workers is still socialist. 

Of course, during the time that the worker works to receive an equivalent of her/his own wage, s/he is subject to the power of management and hence is unfree (see, for instance, Management Rights, Part Four: Private Sector Collective Agreement, Ontario and   Employers as Dictators, Part One).

Political Considerations and Conclusion: Does the Existence of a Union and a Collective Agreement Abolish the Exploitation and Oppression of Workers?

I have been unable to determine whether Tencent workers are unionized or not. If they are, is their situation such that they work under a “fair contract” and can their work be characterized “decent?” I think not. Unions can limit exploitation and can control some aspects of their working lives, but in principle workers are things to be used by employers even with unions. This does not mean that a non-unionized environment is the same as a unionized environment. With unions that are independent of particular employers, that is to say, are real unions, there is an opportunity for workers to develop organizations of resistance against the power of particular employers.

Again, the rate of exploitation measures the extent to which workers work for free, producing all the surplus value and hence all the profit for employers. However, even during the time when they work to produce their own wage, they are hardly free. They are subject to the power and dictates of their employer during that time as well.

Do you think that these facts contradict the talk by the left and unionists of “fair wages,” “fair contracts” (see Fair Contracts or Collective Agreements: The Ideological Rhetoric of Canadian Unions, Part Three: Unifor (Largest Private Union in Canada) for the rhetoric of the largest union of private-sector workers in Canada, Unifor) and “decent work?” Do they ignore the reality of life for workers, whether unionized or non-unionized?

If exploitation and oppression of workers is a constant in their lives, even if they are only vaguely aware of it, should this situation not be frankly acknowledged by their representatives? Do such representatives do so? If not, why not?  Do workers deserve better than neglecting the social context within which they live and work? Should such problems be addressed head on rather than neglected?

Even if workers were not exploited, they would still be oppressed since they are used as things (means) for purposes which they as a collectivity do not define (see The Money Circuit of Capital). Does that express something fair? Management rights clauses (implied or explicit in collective agreements give management as representative of employers–and as a minority–the power to dictate to workers what to do, when to do it, how to do it and so forth–and is not the imposition of the will of a minority over the majority a dictatorship? (See  Employers as Dictators, Part One). Is that fair? Do union reps ever explain how a collective agreement somehow expresses something fair? Is that fair?

The ideology of unions–that somehow they can produce a “fair contract” and “decent work”–needs, though, to be constantly criticized. Workers deserve better than the acceptance of such ideology by the left. Working for an employer, if the work force is unionized, does not change the fact of exploitaiton and oppression but only the degree of exploitation and oppression. 

Should not the left be constantly exposing this? Is it? What do you think?

Data on Which the Calculation Is Based

The calculation of the rate of exploitation is undoubtedly imperfect, and I invite the reader to correct its gaps. Nonetheless, the lack of any attempt to determine the rate of exploitation at the level of particular employers has undoubtedly reinforced social-reformist tendencies.

Surplus Value (s) or Profit 

(RMB millions) [1 Chinese Yuan Renminbi=approximately $0.14 U.S., or $1 U.S.=approximately 7.25 RMB)

Revenues 377,289 
Cost of revenues (209,756) 
Gross profit 167,533 [377,289-209,756=167,533]
Interest income 6,314 
Other gains, net 19,689 
Selling and marketing expenses (21,396)
General and administrative expenses (53,446)
Operating profit 118,694 [167,533+6,314+19,689-21,396-53,446=118,694]
Finance costs, net (7,613) 
Share of (loss)/profit of associates and joint ventures (1,681) 
Profit before income tax 109,400 [118,694-7,613-1,681=109,400]

Adjustments to Calculations

Why make any adjustments to the calculations used by the authors of the annual report? Marxian economics distinguishes between the actual situation–its essence, if you like–and appearances, which in a capitalist society often differ from the actual situation. Appearances can be very deceptive. Capitalist relations objectively distort the real nature of the kind of situation in which people find themselves. We need to adjust the calculations to transform the deceptive appearances into the actual situation. 

I will make adjustments according to the order of the above data, with adjustments taking firstly into account only the main categories and then some of the subcategories.

First Adjustment of Surplus Value (s) (Profit before income tax)

As I wrote in another post:

Since the idea of calculating the rate of exploitation of particular employers is to determine the extent to which the particular employer exploits its workers, income derived from the exploitation of workers other than its workers should be excluded.

The idea of calculating a particular rate of exploitation should aim to determine, as accurately as possible, to what extent a specific capitalist company exploits a specific group of employees. Therefore, “Interest income” is a very general category that does not derive from the exploitation of workers identifiable as being employed by a particular capitalist company but from the general exploitation of workers. If others have good reasons for including such income, I would like to hear their reasons. 

I will exclude (subtract) such income from the calculation since the income is derived from workers other than the workers of Tencent. 

First Temporary Adjusted Surplus Value or Profit before income tax 

103,086 [109,400-6,314=103,086]

Second Adjustment of Surplus Value (s) (Profit before income tax)

Since “Selling and marketing expenses” are a completely separate category, both the wages paid for marketing and the constant capital used in marketing should be added to the surplus value produced by Tencent workers. Work performed in the sector that transforms already produced commodities into money (and money into capital) does not produce surplus value (though it may well involve the performance of surplus labour).

I place a short discussion of a possible way to treat selling and marketing expenses in Marxian terms as an appendix for those who are interested in such matters. I welcome any theoretical or empirical corrections. 

So, we have: 

Second Temporary Adjusted Surplus Value or Profit before income tax 

124,482 [103,086+21,396=124,482]

The next category–“General and administrative expenses”–also appears to follow the same logic as the category “Selling and marketing expenses.” Although the work of such workers accomplishes something (such as the recording of the transfer of property from one property owner to another)–their work does not change the value of what is produced. Another source must be found to pay continuously for their wages. That source in this instance is surplus value.

However, the nature of the work of this category includes the following: 

R&D expenses and staff costs

Staff costs, although expenses from the point of view of Tencent, are not expenses from the point of view of the source for paying such expenses, which comes from surplus value. However, R&D are different, as Anwar Shaikh and E. Ahmet Tonak  (1994), in Measuring the Wealth of Nations: The Political Economy of National Accounts, page 14, argue: 

Business R&D expenses and exploration costs are a different matter; they are a part of the circuit of capital.

Since the annual report does not specify the proportion of “General and administrative expenses” is allocated to “staff costs” and the proportion allocated to “R&D expenses,” I have decided to refrain from making any adjustments based on this category. 

Third Adjustment of Surplus Value (s) (Profit before income tax)

The category “Finance costs, net” is an expense from the point of view of Tencent, but the source for paying interest is surplus value. Consequently, it is necessary to add this amount to “Profit before income tax.” 

Third Temporary Adjusted Surplus Value or Profit before income tax 

132,095 [124,482+7,613=132,095]

Calculation of Variable Capital (V) (Employee Benefits Expenses) 

One further adjustment to surplus value or profit before income tax cannot be made until we look at the expenses for hiring workers. 

Employee Benefit Expenses RMB’Million

Wages, salaries and bonuses 35,782
Contributions to pension plans (Note) 3,001
Share-based compensation expenses 10,500
Welfare, medical and other expenses (Note) 3,725
Training expenses 115
53,123 

The income expressed in the category “Share-based compensation expenses” needs to be transferred to surplus value (profit before income tax) as I argued in another post:

It seems clear that the money allocated to the category is limited to select employees. … The reasoning for including some (if not all) of it as part of surplus value is that this compensation is not mainly for the coordination of the work of others but for the exploitation of others–it is pure surplus value. 

Indeed, in the annual report, we read, for example: 

SHARE-BASED PAYMENTS 
(c) Employee investment schemes
To align the interests of key employees with the Group, the Group established six employees’ investment plans in the form of limited liability partnerships in 2011, 2014, 2015, 2016 and 2017 (the “EIS”) respectively. The EIS in 2011 was terminated in 2019. According to the term of the EISs, the Board may, at its absolute discretion, invite any qualifying participants of the Group, excluding any director of the Company, to participate in the EISs by subscribing for the partnership interest at cash consideration.

As for directors (and other senior management), we read:

Senior management’s emoluments [a salary, fee, or profit from employment or office]
Senior management includes directors, chief executive officer (“CEO”), president and other senior executives. The aggregate compensation paid/payable to senior management for employee services excluding the directors and the CEO, whose details have been reflected in Note 14(a), is as follows:

RMB’000
Salaries, bonuses, allowances and benefits in kind 379,536 
Contributions to pension plans 759 
Share-based compensation expenses 2,219,669 
2,599,964

The above sums, I will assume, form part of the 10,500 (million) RMB listed above as part of total “Employee benefit expenses.” This sum must be subtracted from variable capital (Employee benefit expenses) and added to surplus value (Profit before income taxes). Accordingly: 

The Rate of Exploitation of Tencent Workers

Final Calculation (Based on Adjustments) of Surplus Value (Profit before income tax), Variable Capital (Employee benefit expenses) and the Rate of Exploitation or the Rate of Surplus Value 

Final Adjusted Surplus value (Income before income tax) 142,595[132,095+10,500=142,595]
Final Adjusted Variable Capital (V) (Employee benefit expenses) 42,623 [53,123-10,500=42,623]

To calculate the rate of exploitation or the rate of surplus value, we need to divide “Surplus value (s)” or “Income before income taxes” by “Variable capital (v) or Adjusted “Salaries and Benefits.”

So, with the adjustments in place, the rate of exploitation or the rate of surplus value=s/v=142,595/42,623=3.35=335%. 

This means that, in terms of money, $1 of wage or salary of a regular Tencent worker  results in $3.35 surplus value or profit for free.  Alternatively, for every hour worked, a Tencent worker works 201 minutes (or 3 hours 21 minutes) for free for Tencent. Or, within one hour of work, a worker receives an equivalent of her hourly wage in 14 minutes and works for free for 46 minutes for Tencent. 

Of course, during the time that the worker works to receive an equivalent of her/his own wage, s/he is subject to the power of management and hence is unfree (see, for instance, Management Rights, Part Four: Private Sector Collective Agreement, Ontario and   Employers as Dictators, Part One).

The length of the working day varies. 

According to Chinese labour laws:

Chinese labor laws mandate that full-time employees are restricted to working 8 hours per day and a standard 40-hour workweek, with an allowance for a 44-hour workweek on average.

The following was published on the Net in 2021:

As of Thursday morning, more than 4,000 people who said they worked at tech giants such as Alibaba Group Holding Ltd (9988.HK), opens new tab, Baidu Inc (9888.HK), opens new tab, Tencent Holdings Ltd (0700.HK), opens new tab and ByteDance had registered their data.

 

Employees have since also created separate spreadsheets for specific sectors such as real estate, finance, and foreign companies.

 

A majority of the entries on the spreadsheet show that while a five-day week is the norm, many staffers work 10 to 12 hours a day.

The culture of 996, which refers to working 12 hours a day, six days a week, has become an unwritten standard for many of the country’s tech firms.

Political Considerations and Conclusion: Does the Existence of a Union and a Collective Agreement Abolish the Exploitation and Oppression of Workers?

I have been unable to determine whether Tencent workers are unionized or not. If they are, is their situation such that they work under a “fair contract” and can their work be characterized “decent?” I think not. Unions can limit exploitation and can control some aspects of their working lives, but in principle workers are things to be used by employers even with unions. This does not mean that a non-unionized environment is the same as a unionized environment. With unions that are independent of particular employers, that is to say, are real unions, there is an opportunity for workers to develop organizations of resistance against the power of particular employers.

Again, the rate of exploitation measures the extent to which workers work for free, producing all the surplus value and hence all the profit for employers. However, even during the time when they work to produce their own wage, they are hardly free. They are subject to the power and dictates of their employer during that time as well.

Do you think that these facts contradict the talk by the left and unionists of “fair wages,” “fair contracts” (see Fair Contracts (or Fair Collective Agreements): The Ideological Rhetoric of Canadian Unions, Part One for the rhetoric of the largest union of private-sector workers in Canada, Unifor) and “decent work?” Do they ignore the reality of life for workers, whether unionized or non-unionized?

If exploitation and oppression of workers is a constant in their lives, even if they are only vaguely aware of it, should this situation not be frankly acknowledged by their representatives? Do such representatives do so? If not, why not?  Do workers deserve better than neglecting the social context within which they live and work? Should such problems be addressed head on rather than neglected?

Even if workers were not exploited, they would still be oppressed since they are used as things (means) for purposes which they as a collectivity do not define (see The Money Circuit of Capital). Does that express something fair? Management rights clauses (implied or explicit in collective agreements give management as representative of employers–and as a minority–the power to dictate to workers what to do, when to do it, how to do it and so forth–and is not the imposition of the will of a minority over the majority a dictatorship? (See Employers as Dictators, Part One). Is that fair? Do union reps ever explain how a collective agreement somehow expresses something fair? Is that fair?

The ideology of unions–that somehow they can produce a “fair contract” and “decent work”–needs, though, to be constantly criticized. Workers deserve better than the acceptance of such ideology by the left. Working for an employer, if the work force is unionized, does not change the fact of exploitaiton and oppression but only the degree of exploitation and oppression. 

Should not the left be constantly exposing this? Is it? What do you think?

Appendix

The issue of how to treat selling and marketing workers (sales work in wholesale and retail trade) and the machines, buildings and equipment they use is relevant to calculating the rate of exploitation of workers who produce surplus value (such as Tencent workers), because it complicates the calculation.

From Fred Moseley (1997), “The Rate of Profit and the Future of Capitalism,” pages 23-41, in Review of Radical Political Economics, Volume 29, Number 4, pages 26-27:

Circulation labor is labor related to the exchange of commodities and money, including such functions as buying and selling, accounting, check processing, advertising, debt-credit relations, insurance, legal counsel, and securities exchange. Marx argued that circulation labor does not produce value and surplus-value because exchange is essentially the exchange of equivalent values. Circulation labor only transforms a given amount of value from commodities to money, or vice versa. …

Capitalist enterprises must of course pay unproductive labor to carry out these necessary functions, even though, according to Marx’s theory, these functions do not produce value and surplus-value. Therefore, the costs of this unproductive labor cannot be recovered out of value which it produces. Instead, these unproductive costs are recovered out of the surplus-value produced by productive labor employed in capitalist production.

This means that the source of the money to pay for the workers in marketing is, ultimately, the surplus value produced by Tencent workers (and other workers who produce surplus value). This does not mean that workers in marketing are not exploited; they too undoubtedly perform surplus labour as well–but they do not produce surplus value, which is the surplus performed and transformed into money form by means of the process of buying and selling (whether that occurs simultaneously with the activity as in the case of services or subsequently as, for example, in the production of beer).

The means of trade or selling and buying used in marketing also would probably be calculated as part of surplus value since, although they are a cost from the point of view of the individual capitalist, they are paid out of value produced by Tencent workers and other workers who produce surplus value. From Moseley (1997), page 27:

The rate of profit being analyzed here is by definition equal to the ratio of the amount of profit (P) to the total stock of capital invested (K). According to Marx’ theory, profit, the numerator in the rate of profit, is the difference between the annual flow of surplus-value (S) and the annual flow of unproductive costs (Uf) (almost entirely the wages of unproductive labor, but also includes a small part (about 5%) of the costs of materials and the depreciation costs of buildings, machinery, etc. used in unproductive functions): (1) P = S – Uf.

Or again, in the work by Anwar Shaikh and E. Ahmet Tonak (1994), Measuring the Wealth of Nations: The Political Economy of National Accounts, pages 45-46, when discussing a hypothetical total production of value of $2000, with c=$400, v=$200 and s=$1400, they assume that the total value of $2000 is sold to wholesalers for a price of $1000, and the wholesalers (and, eventually, retailers), mark up the price to consumers to the level of total value of $2000:

From the Marxian point of view, nothing has changed in the production process, so that constant capital C*, variable capital V*, and surplus value S* are unchanged. But whereas the total surplus value S* = $1400 previously accrued entirely to the production sector as profits, it is now divided between the profits of the production sector (Pp = $400) and the trading margin of the trade sector
(TM = Mt + Wt  + Pt = $1000).

where TM=trade margin, Mt=intermediate inputs (c for trade, such as building rentals or purchases, sales counters, registers, forklifts, storage facilities, etc.), Wt=wages for trading activities and Pt=profit for trading activities. The value of inputs (c+v) for the sector that produces value is 600, with the distribution between c and v and s as follows: c=400, v=200, s=1400. However, since it is sold only for 1000, the actual s received for the sector that produces surplus value is 400. For the trade sector (indicated by t in parentheses), the distribution of the $1000 in s is c(t)=200, v(t)=400 and s(t)=400.

Note, however, that c(t) and v(t), though expenses from the point of view of the individual trading employer, is paid from the surplus value produced by workers in the production sector.