Efficiency-driven innovation
In becoming the“factory to the world”，China also became a leading innovator in efficiency-driven innovation.No longer simply a source of low-cost labor，Chinese manufacturing companies are gaining in knowledge-intensive manufacturing categories such as electrical equipment and construction equipment.This progress has been enabled by the vast scale of China's manufacturing ecosystem.China has more than five times the supplier base of Japan，150 million factory workers，and modern transportation.
The combination of supply-chain advantages from this ecosystem and largescale gives Chinese solar panel manufacturers a cost advantage of 22cents per watt，or about 15 to 20 percent，over foreign peers，according to a Massachusetts Institute of Technology study.Chinese companies are driving efficiency in a variety of ways，including agile manufacturing，modular design，and a flexible approach to automation.
Modularization saves money by breaking products down into subassemblies.This approach is even being used to industrialize construction.Broad Construction assembled a 57-story hotel in Changsha in 19 days from prefabricated components to demonstrate its innovations.China has become the number one purchaser of robots.
An important development in efficiency-driven innovation is the evolution of open manufacturing platforms.The“maker”movement has taken off in China，and the ecosystem that supports individuals and small entrepreneurs can also work on a global scale.In Shenzhen，a network of component suppliers，design services，business incubators，and outsourced assembly capacity is enabling rapid prototyping and scaling up of manufacturing businesses.HAX Accelerator operates incubators in Shenzhen and San Francisco and brings startup teams from around the world to Shenzhen when they are ready for prototyping.
Open manufacturing platforms are made possible by the rich Chinese manufacturing ecosystem，which is exemplified by Shenzhen itself.The city has 2，000 electronic component and product manufacturers，more than 1，000 makers of electrical parts and equipment，300apparel makers，and a labor force of nine million.Design firms in Shenzhen can turn ideas into prototypes in as little as one-fifth the time and at half the cost for doing such work in-house.The city's modern infrastructure then speeds goods to world markets.
Chinese companies will have to innovate in new ways to retain China's lead in manufacturing.Not only are rising wages in China making it a less competitive site for labor-intensive work such as low-end apparel manufacturing，but there is also a worldwide shift in the manufacturing sector to the“Industry 4.0”model in which major processes of manufacturing and logistics are digitally linked.Next-generation manufacturing promises significant gains in asset utilization，supply／demand matching，and quality control.It also has the potential to shift the basis of competition in manufacturing，providing an opening for advanced economies to take back some lost ground.Germany，the United States，and other advanced economies are using policy and investment to seize the lead in the Industry 4.0 era.China has announced a series of programs to support its bid for leadership，too，starting with“Made in China 2025”，unveiled in March 2015.
As Chinese companies move to the next-generation manufacturing model，the nation's manufacturing ecosystem can provide additional advantages—extending benefits beyond individual factories and across a digitally linked ecosystem that can enable a new level of rapid，flexible manufacturing，and mass customization.With a massive supplier base，factories can be adapted to many types of manufacturing，modern logistics，and digital links to customers around the world.Chinese companies can become virtual manufacturing resources，offering manufacturing as a service to companies around the world and even filling custom orders for individual consumers.