I used to feel a bit sour when I bought things overseas that had been made in China, not because I was not proud of what Chinese workers had contributed to the world economy, but because I knew that bad working conditions and meager pay for Chinese migrant workers underlined the pride we felt in the label made in China.

In other words, mixed with the pride was a sense of humiliation that our manufacturers could only make, rather than design or create. The question that lingered on my mind was why we should always be at the lowest end of global manufacturing chain, which has rendered us nothing but a tool with which transnational firms make big bucks.

But my feelings became more complicated when I was in the United States in April. At an outlet in Chicago, I noticed that many of the T-shirts and other clothes, as well as shoes and even bags, were made in India, Vietnam, Peru and some other developing countries. I was suddenly gripped with the notion that China was losing its status as the world's largest manufacturer and this notion made me shudder.

There are reports that factories in the coastal areas of China have difficulties getting orders from transnational companies. Apparently the much talked-about higher pay and better working conditions migrant workers have been demanding have become a reality, which has pushed up the cost for goods made in China. What has made things even worse are the ever-rising prices for raw materials that have further thinned the profit margin for processing factories.

How time flies! When I first heard of higher wages for migrant workers a couple of years ago, I was pleased that the young men and women from rural areas would finally be getting fair pay for their work. When it became difficult for manufacturing factories to recruit migrant workers a couple of years ago, I was jubilant that it had finally become a seller's market.

But now it reminds me of the situation of the workers in the automobile factories in the United States. The powerful trade unions have obtained for workers in these factories the most handsome pay of its kind in the world. But the high wages of the workers undermined US automakers' competitiveness by dramatically raising the operating costs.

The business rule of making the maximum profits at the lowest cost is ruthless, and so is market competition. No matter how good the trade unions' intentions were, it was their efforts, to a large extent, that caused the collapse of the US car industry.

Of course, the situation in China's processing industry is different and so is the situation of migrant workers, who did not even have time to enjoy the good days before their jobs went elsewhere.

It is only natural for transnational firms to seek higher profits in other developing countries such as India, Vietnam, Indonesia and some South American countries where the cost of labor is lower. That is the way the world economy runs no matter it is fair or not.

For China, it is a question of whether it is prepared for that.

The central government is expecting to deal with the change by transforming the economic growth mode and expanding domestic consumption.

I'm not an economist and know little about economic theories and rules.

You would think that with the world's largest population there should be huge potential in the country for domestic manufacturers to tap. Yet the expansion of domestic consumption will not save the processing industry in today's globalized world.

So where is the way out for the country's processing and manufacturing industry? Maybe we now regret losing the chance of earning ourselves the label of designed or created in China.

But the fact is that it is never too late to change made in China to created in China.

If domestic manufacturers make things of better quality and design than their counterparts elsewhere, it will not be difficult for domestic consumers to accept them. Neither will it be impossible for them to enter the international market. It will not be easy, but that is the way out.

That explains why innovation is the word this country has emphasized when talking about economic growth, manufacturing industries in particular.

The author is a senior writer with China Daily. E-mail: zhuyuan@chinadaily.com.cn

(China Daily 05/16/2013 page8)