Yu Yimin, general manager of the Soho International Group, which deals in natural silk fabrics, says his company has developed an obsession with innovation, which it considers the only way to survive.

"Importers would just say 'No way' and walk out on us if we hinted at a price hike as competition is fierce in China, but if we have something unique, then it strengthens our hand," Yu says.

Based in East China's Jiangsu Province, the company has established its name for manufacturing rare male raw silk and is developing artificial skin from silk protein. Yu is confident that his company will be more competitive as the artificial skin --already in clinical use -- will cost just one-tenth of similar products abroad.

As the world's third biggest trade power expands rapidly after the United States and Germany, China hopes to polish the reputation of "Made in China", making it a mark of quality rather than cheapness.

Processing trade requiring only simple assembly of imported raw materials, which boost the country's foreign trade takeoff in the 1980s, is no longer widely encouraged. Processing trade imports and exports totaled 440.9 billion.

As China-made motorcycles are priced at only US$400 on average, the move immediately set back China's motorcycle exports.

For instance, Taizhou, a port city in east China's Zhejiang Province, saw its motorcycle exports plummet from 166,000 units worth US$75.71 million over the first half of 2006 to 78 units worth US32,000 in the first seven months of 2007, as figures from Hangzhou Customs revealed.

The solution, Lifan figured, was to set up motorcycle plants in Turkey. "Will there still be trade friction? No. We're now part of Turkey's economic family and are well taken care of," says Yin Mingshan.

Looking to the future, experts warn that the biggest menace to Chinese exporters is expectations of continued RMB appreciation that could trigger an influx of speculative funds so as to jeopardize the country's financial stability and wipe out profits of export-oriented manufacturers.

A recent survey shows that three quarters of the 103 export companies polled by the China Business News had no idea of or had not used financial hedge tools to reduce exchange rate risks.

Many small and medium-sized export-oriented enterprises are still used to adding an exchange clause in contracts or shortening collection period, the time period for which receivables are outstanding, to reduce exchange rate risks.

Some larger ones have started to try forward foreign exchange trading, which require exporters to sign forward contracts with banks to sell or purchase foreign exchange on agreed date at agreed exchange rates.