Question

in 300 to 400 words, . Why is Germany so successful at international trade?
What has happened economically in China during the past twenty-five years?

Answer 1

1. There's no denying Germany's greatly benefited from the euro. Through sleeping with more stagnant economies in southern Europe, Germany embraced a much weaker currency than would otherwise have been the case-as one of the few countries in the world with a balance of payments surplus would have been much stronger than the euro. It has offered German exports a great boost, which as a result are cheaper for overseas consumers.

In 2003, Germany embarked on a program of radical labor market reform, triggered by excesses in wage rises following unification. Clear laws on job security and a degree of confidence on behalf of the workers in well-capitalized firms that had not over-borrowed meant that the Social Democratic government was able to use its strong relations with labor unions to press for reduction in wage inflation. The reforms laid the foundations for a stable, competitive labor market. Though unemployment exploded across Europe and the US during the global downturn, Germany's jobless number barely flickered remarkably.

2. Since the economic reforms started just over 25 years ago, the rate of economic change in China has been extremely rapid. In the past two decades, economic growth has averaged 9.5 per cent and appears likely to stay at that pace for a while. Every eight years national income doubled. Such an increase in production represents one of the world economy's most enduring and rapid economic changes over the last 50 years. When adjusted for disparities in buying power, the scale of the economy is now greater than all OECD economies except one or two, depending on the purchasing power ratio used for comparison.

This remarkable economic success was motivated by changes in government economic policy that slowly gave the market forces greater rein. The transition started more than two decades ago in the agricultural sector and was eventually expanded to manufacturing and large parts of the service sector, thus effectively eliminating market control outside the energy sector by the year 2000. During this period, the government enacted a pioneering company law which allowed private individuals to own limited liability companies for the first time.

A strategy of "letting small businesses go" by privatization and closure, on the one hand, and reforming big business, on the other, has proven effective since 1998. In the following five years, the number of state-controlled industrial enterprises fell by more than half, and their payroll declined by over 14 million, due in part to the implementation of more flexible job contracts. The development of unemployment and welfare services contributed to this process.