In January 2012, China's exports declined by 0.5 percent year-on-year to $149.9 billion, the first monthly fall in more than two years. The exports further decelerated in April, renewing fears of a harder-than-expected landing. Shi Shusi, a media commentator, believes it shows China's manufacturing is facing challenges and pressures. Excerpts of his views follow:

The year 2010 embraced the world's new manufacturing king, China, who regained the top manufacturer position after the United States had occupied it for more than 100 years since 1895. In 2010, China accounted for 19.8 percent of world manufacturing output, fractionally ahead of the United States with 19.4 percent. However, since China reversed to the top position, its manufacturing sector has been facing challenges and pressures.

The emerging of China's manufacturing relies heavily on its abundant cheap labor resources. But now this shrinking comparative advantage and the bleak prospects of the world trade situation are predicting China's manufacturing sector is in trouble.

Under the pressure of sluggish economic growth and high unemployment rates, Western economies are making efforts to push reindustrialization, stimulating economic growth especially through government aid to revitalize and modernize aging industries and encourage the growth of new ones. A recent report by Boston Consulting Group estimated that 15 percent of American companies targeting the North American market may bring their operations back to the United States from China.  

Since becoming a member of the World Trade Organization, China has been constantly criticized for practicing trade protectionism. China has suffered investigations for countervailing duties for 15 consecutive years. Figures revealed that China was involved in 35 percent of global anti-dumping cases and 71 percent of global countervailing duties cases in 2009. Meanwhile, the rise of nearby emerging economies, like India, is undermining China's comparative advantage of low-cost labor resources, threatening the country's manufacturing industry. Statistics released in this year's Boao Forum for Asia showed that the average monthly salary for employees in the manufacturing sector is about 1,000 yuan ($159) in Viet Nam, 600 yuan ($95) in India, but 2,500 yuan ($397) to 3,000 yuan ($476) in coastal China.

However, none of these is China's biggest enemy.

Jin Bei, Director of the Institute of Industrial Economics at the Chinese Academy of Social Sciences, once expressed concerns over a tendency toward de-manufacturing as the sector faced pressures from rising production and resource costs and low profit margins. 

In the past, although at the low end of global industrial chain, China achieved rapid development in manufacturing. But challenges lurked. For example, many factories overly relied on processing, were obsessed with winning quick gains or resorted to cutthroat competition. Many of them had no brand awareness and were not able to achieve management and technology innovation, thus facing the risk of bankruptcy under the pressure of economic transformation and industrial upgrading.

China's manufacturing also faces the problems of outdated technology and equipment in key production chains. Technologies in industries like steel, nonferrous metal, petrochemical and coal fall five to 10 years, even 20 to 30 years, behind international level.  

The productivity of China's manufacturing in 2007 only accounted for one fifth of that of the United States due to its lagging technology. In 2010, the United States exports of copyrighted products reached $134 billion, while China exported only $7.69 billion.

What makes it worse is that government investment has played the prime role in boosting the economy since 2008 to tackle the economic crisis. With more and more investment rushed in, the monopolistic large and medium-sized state-owned enterprises saw rapid development, while no obvious improvement in private manufacturing.

Under the circumstances of foreign trade deteriorating and sluggish domestic demand, large sums of private capital were speculated for short-term gains, like in real estate, as it had no investment destination.

Reasons for all of these rooted in the system. If the situation continued, we wouldn't be defeated by international competitors, but be destroyed by ourselves. Thus, comprehensive reform is urgently needed. Particularly, state-owned enterprises' "super-national treatment" has to be ended. These enterprises have to be privatized in accordance with the principles of a market economy. And a fair macroeconomic fiscal and tax environment should be created to boost private enterprises. The government's recent move of setting Wenzhou as a pilot for financial reform is regarded as a positive sign. 

More specifically, the government should help accelerate the upgrading of private labor-intensive enterprises, continue to support large enterprises that completed privatization and strategic industries with independent intellectual property rights. And it should also actively get involved in international competition as well as mergers and acquisitions.

But despite increasingly severe international competition, the competitive advantages of Chinese manufacturing are still prominent. China is one of the few nations where manufacturing runs the gamut from low- to high-end sectors and it is also backed by the rapid economic development. Its future depends on whether it can establish a strong position in high-end manufacturing.