If Germany is export driven how is it able to stay competitive against China et al.

Discussion in 'Economics' started by short&naked, Jan 28, 2013.

  1. I have been looking for a lucid economic explanation how Germany, which has a manufacturing/export based economy, is able to stay competitive in the global economy while still paying European level wages to its workers?
  2. Because they are exporting high-tech and up-market goods for which there is not much competition from low-wage countries.
  3. mm19


    finally, romantic on ET :)

    reality is a bit different. Germany sold eu to chinese and in return they get to play boss in eu dictated by chinese. Chinese opened their market for german cars in return.
  4. zdreg


    there is competition from low wage countries including china itself.
    e.g. restaurant kitchen equipment -ovens. a chinese oven costs $3300. the german oven costs $8500. if you want the best you get a german oven which includes longer life, less repairs, more even heating and more accurate temperatures controls. the deal is clinched by the fact that the german co.s, who have access to money at very low rates, will finance the deal with extremely low loan rates.
    the differential in costs can then become negligible in time.
  5. Wages are only part of the story, productivity is what counts. Southern Europe's unit labor costs are high, productivity is low when compared to Germany.
  6. For industrial equipment, Germany has long standing reputation and long standing markets. For traceability and certification of equipment you get everything you want from germany, in China certification and traceability can be problematic due to (a) not being available (b) not to standard (c) language problems (d) difficult to communicate with China ie unprofessional in some instances-lack a track record of experience. (d) Poor workmanship in the past has left its mark.
    I think China is improving and will get over this, a bit like the early japanese cars era.
  7. Here is the answer I believe.


    Ironically Germany needs the EU to fail for its own success.

    It lives off the diminished currency value it creates.

  8. Precision, German Precision!
  9. jem


    One of the best answers I have read. Very nice analysis. I suspect you are correct.

    I wonder though... at what point do the weaker states have a de minimis impact on the currency... and have some gotten there.
  10. iamdom


    You would be surprised how many BMWs a country like Greece buys. Even though theses countries are broke, somehow their citizens can afford luxary cars. I guess it helps when you don't pay any taxes or show any income. Germany needs the union because without it the individual countries' currency would be worthless and theirs would be sky high, and they would not have anyone to sell too. The euro/us dollar has also moved in their favor , so they have a great home and foreign market. Should the union fall apart, Germany would be doomed and this is why they are paying to keep these countries in the union. Its all one big farce.
    #10     Jan 28, 2013