"The manufacturing philosophy employed by many foreign multinationals in China in recent decades is in need of an overhaul," observes Haddock. "China's changing cost and currency structure have shifted, forcing companies to rethink how they structure their Chinese operations and how they perceive China in their overall global strategy. At the same time, China is increasingly a major source of product and business model innovation. We're seeing globalization at work and China's role has changed."

The study surveyed 66 of the 600 largest foreign-owned or foreign-invested companies manufacturing products in China. Results show that more than half believe the country is losing its competitive edge in manufacturing to other low-cost nations, with nearly one in five manufacturers surveyed indicating concrete plans to relocate or expand China operations to other countries. Vietnam and India are seen as the top alternatives.

Among the study's key findings, more than half believe China is losing its competitiveness to other low-cost countries, with 70% citing the rising renminbi as a major reason for decline and 52% citing rising wages. But many respondents also expressed concern that China is lagging behind global standards in many operational dimensions, especially logistics infrastructure. Nearly 90% of the corporations planning to move operations elsewhere say they originally chose China for its lower labor costs but are finding that cheaper labor and tax benefits have made alternative locations more attractive. Among these corporations, 63% name Vietnam as the top alternative, while 37% name India.