China holds competitive edge as top manufacturer (3)

According to a Reuters survey, 37 percent of Japanese companies said they had grown more cautious toward using China as a production hub over the medium term.

But there are still optimistic voices insisting that China's advantages remain apparent.

"China may lose its edge in low-end manufacturing, but is still very competitive in medium- and high-end manufacturing," said Li Yushi, vice-president of Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce.

Li, who is a guest economist of China Daily, said Chinese workers are more skilled and have a stronger work ethic than their counterparts in many emerging economies.

Andrew Heath, director of international marketing division of Shenyang Machine Tool Co Ltd, China's largest machine tool producer, said China's manufacturing strength lies in its established supplier network.

"Those who are talking about relocating do not know the basics of business. It is not so easy to relocate plants," he said.

"We need to have natural resources. We have to purchase and have a supply chain. And we have the huge market. Why would I move?"

The service industry is another potential growth point for FDI flowing into China, and an area that could absorb workers laid off from manufacturing companies.

Despite the drop in manufacturing FDI, China's service sector saw an increase of 4.8 percent in its FDI in 2012.