In the past 15 years, Japan’s exports have suffered a setback, but Germany’s exports have been impressive. In this article, we will look at the two big exporters that were in a similar position 15 years ago. Now the circumstances are clearly different behind the scenes. edm electrical discharge machining
Compared with the development experience of Japan and Germany, the German government supports the development of small and medium-sized enterprises, regardless of the advantages of German industrial exports mentioned in this paper. The concept of “Industrial 4.0” in Germany with the themes of “Intelligent Factory” and “Intelligent production” can be used for reference and pondered by China on the road of the new industrial revolution.
Germany-the export machine. The chart below shows how Germany has emerged in the new century to repel its competitors. In dollar terms, Germany is the world’s third largest exporter. China is the first. The United States is second. But Germany is by far the world’s largest exporter, weighted by population and GDP, reaching about $17000 per capita. edm electrical discharge machiningGermany exports more per capita than China, the United States and Japan combined.
Why has Germany surpassed so many of its rivals in the past 15 years? We pay particular attention to comparing Japan, because 15 years ago the two countries looked like specialized products (cars and capital assets), with similar world-leading technologies. edm electrical discharge machining We think there are a number of reasons why Germany is doing better.
Reason one: Germany’s unparalleled small and medium enterprises. Most readers should be familiar with Germany’s Mittelstand. -Medium-sized and most family-owned businesses-a unique branch of the economic structure. Supporting economic growth and exports. More than 99% of German companies belong to small and medium-sized enterprises (“German Mittelstand”). Germany’s small and medium-sized enterprises account for about 52% of all economic exports. There are 60 full-time employees and 82% management trainees. edm electrical discharge machining These small and medium-sized enterprises are almost family-owned and run by families. Essentially, the company’s development strategy tends to be long-term, with high shareholder equity ratios and prudent borrowing.
Compared with other developed countries, German SMEs are highly industrial active.
Small and medium-sized enterprises in Germany do not compete badly in price. But competition for quality and product innovation is fierce. edm electrical discharge machiningResearch shows that Germany has the world’s largest “hidden champion” (industry leads but its brands are less well known: 1,307). There are 366 in the United States, 220 in Japan, 128 in Austria, 110 in Switzerland, 76 in Italy, 75 in France and 68 in China. There are 67 in the UK. To maintain this advantage, Germany’s small and medium-sized enterprises are spending nearly 71% more on research and development. Compared with the average large enterprise, the growth rate of R & D is only 19%. The tangible result of this R & D expenditure is as follows:. 54% of German SMEs introduced some form of technological innovation between 2008 and 2010. That compares with an average of 34 percent in the European Union.
Continuous innovation and upgrading help maintain and safeguard the “made in Germany” brand advantages.
The German government is committed to supporting the development of these small and medium-sized enterprises at various levels. For example, the German government has a central SME innovation project to help these enterprises research and development. It promotes international trade and international relations. German Chamber of Commerce overseas (. CCAs have 120 offices in 80 countries. More than 1,700 employees help promote German business interests. Any German small and medium-sized enterprise can go to overseas chambers of commerce to identify potential dealers and other overseas contracts, in part because of this network. Unlike other countries. German SMEs already have a good image overseas. Japanese SMEs tend to provide intermediates to large Japanese enterprises, while American SMEs tend to expand at home rather than overseas. And American chambers of commerce tend to focus on the development of large businesses. edm electrical discharge machining
The German government also strongly supports the development of highly skilled workers at home to help companies finance and secure their raw materials.
Germany’s SMEs have not outsourced much in the past decade, so Germany has consistently maintained good exports. edm electrical discharge machining
On the other hand, Japan’s small and medium-sized enterprises have been in trouble in recent years. Japan’s large producers have come under tremendous price pressure. Small and medium-sized enterprises, which are squeezed by big producers, are mainly supplying them. Because the latter put price pressure on the former, most small and medium-sized enterprises in Japan find it more difficult to reject the demand of their single “back” customers, according to a survey by Japan’s Ministry of economy, Trade and Industry (METI). In early 21th century, much of the rebound in profits for large Japanese companies came from squeezing small and medium-sized enterprises. In the last few years, only about 1/3 of Japan’s small and medium-sized enterprises were profitable.
Two reasons: “made in Germany” and “made in Japan” brand differences. Over the years, “made in Germany” brand promotion. In Germany are not only in the luxury car market leading, also take advantage of the overall auto market. In 2013, the German luxury car brands (Audi, BMW and Mercedes Benz sold 1060000 cars to Chinese), and an increase in 3300000 local assembly mass basis. edm electrical discharge machiningOn the other hand, the Japanese automaker sold 2900000 vehicles to Chinese. Beyond the reputation and performance, the German car seems to have more advantages in their design.
Perhaps our expression is not accurate. But we believe that the majority of German cars and machinery is the product and talent shows itself in the production process of “form” and “function”. This unique combination may have originated in the Renaissance of the early nineteenth Century in Germany at the end of eighteenth Century. At that time the Germans (and British) is seen as more positive the thinker (more quantitative and rational), and compared to neighboring countries, Germany produced incomparable music during the arts, literature and philosophy. Even in mathematics, like Gauss and Lehman Brothers, to show the extraordinary out of the conventional thinking ability. This period of German History may penetrate into the machine “soul.” we believe this is the German car features so intangible are particularly important.
And this view is related to the history of Germany and Japan. Germany in the innovation of science and technology, mathematics, philosophy, a hundred years of history of art and music. While Japan’s history of innovation is much shorter. The long history of the proportion of the differences between the two countries may now also have some impact.
Japan’s electronic products also lost the market. South Korea not only because of the increasingly fierce price competition, to a certain extent on the Japanese electronics manufacturers in terms of innovation is difficult to generate new ideas substantially. In some respects, Japan has also lost the leading advantage of giant in mobile phone technology, and the software has lagged behind although, in some electronic hardware remains ahead.
Reason three: Germany’s advantage as a member of the European Union. In this discussion. It is useful to distinguish between the concepts of “globalization” and “regionalization”. edm electrical discharge machining We recognize that China’s accession to the World Trade Organization in 2001 is an important process of globalization: not only China can export to the world. The rest of the world can also sell goods to China. On the contrary, the European Union and the European Monetary Economic Union are institutional arrangements to promote “regionalization”: to compare trade between member and non-member countries. There are preferential terms in the transactions between EU member states.
For Japan, more than 1/3 of the export growth came from China, and another 1/3 from other emerging markets. In short, the geographical impact on Japan’s export growth is equal: China. edm electrical discharge machining Emerging markets (excluding China) and developed markets each account for 1/3. The EU’s contribution to Japan’s growth is close to zero.
For Germany, the picture is completely different. Emerging markets excluding China account for about 1/3 of Germany’s export growth-close to that of Japan. China accounts for only five percent of Germany’s export growth. Germany’s growing status as an export power has the opposite effect on its support. The EU accounted for 60 percent of Germany’s export growth during this period! The contribution of developed markets outside the EU is close to zero.
In summary, the data show that the rise of Germany as a global export “superpower” is much more “regionalised” than “globalisation” (an unhindered channel of trade within the EU). The latter is the survival of Japanese exports. edm electrical discharge machining
Some policy inferences can be drawn from the above observations:
1. Japan is facing a daunting challenge on its exports
Over the past year in Japan exports was disappointing, despite the sharp depreciation of the yen, which is clearly imply that the Japanese export price inelastic. In the past few years, Japan’s exports by some way to lose its brand. Not only are there other countries (Li Ruhan’s) in the hardware to catch up with Japan. He also seems to own software is also backward, gradually lost innovation good opportunity: the loss in the production process of gradual improvement and breakthrough with innovative technology and products. Japan is a deep-seated problem of fading, philosophy than reality. Our guess is that after the bubble burst, Japan to some extent, lost the risk attitude, accept a so-called “strike mentality”, this is a baseball term: the target is no longer a “home run” but “hit the ball on the line in Japan. Still in robotics has a huge lead industrial and home. This is not the Japanese to the depth of development in the field of gene technology and research? How old people living is another two Japanese in the world’s leading example. In any case, Andouble economic society to develop breakthrough to help transfer (macro the expected deflation) and micro (rigid structure) barriers, but also need something else. In order to make Japan to escape from the current emergency panic, the nation’s collective soul must be changed. To sum up in a word, Andouble economics is a necessary condition for self recovery of the Japanese economy, but not a sufficient condition. edm electrical discharge machining
2. Germany should be more grateful for its status as a member of the European Union
Perhaps we did not have a little careful consideration, until we do the above calculation. In between the EU and EU Member States to protect the welfare of zero currency fluctuations, Germany’s exports are disproportionately from its neighbors and the non EU country competition between profit. Further, the southern European countries are experiencing difficulties also pull low price: for the euro exchange rate than the equivalent of Germany, now the essence of real exchange rate should be higher. Germany needs a strong euro and higher interest rates relatively low. The euro dollar exchange rate and low interest rates in the past few years to promote additional German exports. This point of view, Germany is not for the European financial crisis recovery to make more contributions are questionable. Of course, the problem is German for southern European countries expected debt will have a moral risk Questions.
3. Domestic investment in Japan is key
There has been much concern about the fact that Japan has lost a lot of market share in global exports, and in the face of a sharp depreciation of the yen. Real exports have not rebounded. If Abenomics cannot stimulate exports with a weaker yen, how can Japan recover? In thinking about what Abenomics can ultimately achieve, considering the various components of aggregate demand may help in the first year of Abenomics’s implementation by: YC I G NX. C (consumption) and G (government spending) support economic growth. Despite the severe weakness of the yen, NXX (net exports) unexpectedly became a drain on emergency growth in order to revive the Japanese economy. I- (investment) must eventually become the driving force in economic growth, along with C. Prime Minister Abe’s third arrow was to provide a competitive, flexible supply of labour. And product market restrictions create a structurally unhindered environment. Mr Kuroda’s first arrow was to adjust inflation expectations. And give exporters a profit cushion that allows them to consider investing in Japan. On the other hand, the first arrow can be seen as enhancing the ability of Japanese companies to increase domestic investment. At the same time, the third arrow is designed to increase their willingness to do so. In any case, an investment boost would be the ultimate test of Abenomics’s success.
Conclusion: Japan’s export industry has stagnated over the past 15 years in sharp contrast to the development of Germany during this period. The differences between the two are microeconomics (small and medium-sized enterprises in Germany). And the change in Japan’s innovation model. There is also macroeconomics (German “monopoly” in the European market). Japan’s ruling party needs to realistically consider Abenomics within its reach. Our feeling is that Abenomics is a necessary but not sufficient condition for japan’s economic self-recovery. The first arrow can increase the presence of Japanese enterprises in the country. The ability to invest internally. The third arrow can strengthen their will. But a fundamental change in Japan’s collective spirit is still necessary. edm electrical discharge machining