Innovation, services to drive future growth

Q2. Due to rising labor costs and a rising yuan, Chinese manufacturers are losing their previous advantages. What do you project for China's manufacturing industry? And do you have any suggestion for Chinese enterprises?

We actually have done a study (on this). At A.T. Kearney, we have a think tank called Global Business Policy Council, where we are looking into the mega trends that are affecting the world globally.

In fact, we recently published a report called Mega Trends Affecting Us Through 2020, what are the things that will happen in the next seven years. A couple of things will impact China's manufacturing:

One, China no longer has the low cost advantage, because of the rising labor costs.

Second, with shale gas changing energy dynamics and the cost of energy, making "Made in USA" as competitive as "Made in China" going forward.

Third, 3D printers lower the entry barrier in terms of low-end manufacturing. In fact, right now, some of the parts in airplanes are made by 3D printers. Some of the parts in medical equipment are manufactured out of 3D printers. So it is already happening. It is not something about the future, it is something that already happened.

The fourth, obviously, is robotics. If you look at the US, a lot of high-end manufacturing is done by robots, rather than humans. So all these will definitely have a serious impact and challenge to manufacturing in China, because you are no longer cheap, and you don't have the technology like the Germans or the US, and your energy cost is not competitive because you cannot extract shale gas like the US can.

So, therefore "Made in China" not only is not as good as "Made in USA", probably it is more expensive than "Made in USA".

Therefore, going forward, if manufacturers in China do not transform themselves, either in their manufacturing processes, or redesigning their supply chains, to be more cost-effective or cost-efficient, they will be forced out of business pretty soon. And this is real. This is not looking into the future, this is happening as we speak.