China's manufacturing in transition

China, the world's second largest economy, is the world's largest manufacturer. However, the US' recent pivot back to the manufacturing sector and its so-called "re-industrialization" strategy are posing new challenges to China's manufacturing businesses. At the ongoing Asian Manufacturing Forum being held in Beijing, industry experts are calling for accelerated innovation for China's manufacturing industry.

It's now time to re-tool the "world's factory"-- a clear message sent from industry experts attending the 6th Annual Conference of the Asian Manufacturing Forum being held in Beijing.

Li Wuwei, the vice chairman of Chinese People's Political Consultative Conference, or CPPCC, says China has to change its manufacturing strategy to be more innovative in technology in order to compete with a "reviving" US.

Li Wuwei, Vice Chairman of CPPCC, said, "China and the US represented 19.8% and 19.4% respectively of 2010's global manufacturing output, however to achieve that, the US only had 11.5-million workers in the manufacturing sector, whereas China had more than 100-million workers in the same sector. Although the scale of China's manufacturing industry exceeded America's, the productivity of the American labor force is nearly 10 times of that of China's."

The US' "re-industrialization" strategy and its accelerated efforts to "return" to manufacturing in the wake of the global financial crisis are re-forging the world's manufacturing landscape.

Some say that China's manufacturing sector has run into what analysts call a "sandwich trap"-- squeezed from one end by places with even lower labor costs, such as Laos and Vietnam, and yet struggling to move to higher ground making more advanced products to compete with developed nations such as Germany and the United States.

Luo Jun, CEO of Asian Manufacturing Association, said, "China's manufacturing sector now stands between ASEAN countries' manufacturing mode and the US and European mode. But it is an inevitable transition as China gradually completes its industrialization and industrial upgrade. The US' "return" to the manufacturing sector won't pose any threat to China's traditional manufacturing sector. The US is to have a technology-based high-end manufacturing which includes areas that will be the most competitive in the future."

But despite the challenges, Chinese manufacturing activity did pick up momentum in November, with the government's official purchasing managers' index or PMI reaching 50.6, indicating increasing new business and expanding production.

In its efforts to become an innovative nation, China also plans to raise the proportion of GDP invested in research and development to 2.2 percent by 2015, that's a substantial increase according to the country's 12th Five-Year Plan. And though traditional manufacturing did help China become a leading driver in the world economy, the country now is determined to accelerate innovation to support growth rather than remaining the "world's factory.