BOAO, Hainan, April 9 -- It might be a bad time for Chinese manufacturers as the economic slowdown and restructuring squeeze their profit margins. It could also be good for them too, if they can embrace innovation to move up the value chain.

The good old days for China's low-cost manufacturers are gone. They now feel the pinch due to factors including mounting excess capacity, rising labor costs and increasing international competition.

"We found that China's industrial revolution was less technologically innovative compared with Britain and the United States," said Nobel Prize Laureate Ronald Harry Coase at the ongoing Boao Forum for Asia (BFA) 2014 Annual Conference.

"This was disturbing and unfortunate, particular since the modern economy has become more and more knowledge-driven," said Coase, one of ten delegates who questioned over 40 Chinese entrepreneurs on their innovation willingness and capability at the forum.

MOVING UP THE LADDER

For Chinese iPhone fans, they may lament as their smartphone screens are made by overseas manufacturers. But they may feel a little relieved if they know that the super glass walls of some Apple stores are made by a Chinese glass manufacturer.

"The market for ordinary glass is getting smaller with increasing competition and decreasing margins. The only way to survive is to move up the value chain through innovation," said Dou Qinghe, vice president of AVIC Glass, a specialist glass maker in south China's Hainan Province.

Like Dou, more Chinese entrepreneurs are racing to catch up with international competitors using expertise, talent and financial firepower.

"The speed of innovation is much higher than that in the west. Just think about how China looked 30 years ago, now you see first-class technical universities cooperating with Chinese industries to further innovate," said Ernst Ulrich von Weizsacker, co-President of the Club of Rome.

According to a report released by the World Intellectual Property Organization in March, China ranked third in total international patent applications to the Patent Cooperation Treaty, with over 20,000 applications, up 15.6 percent year on year.

"China is very responsive and receptive to innovative ideas and sectors, such as e-commerce and Internet finance. The embrace for such innovations in turn facilitate further reforms by helping nurture a multi-tier and freer capital market," said Gregory D. Gibb, Chairman and CEO of Shanghai Lujiazui International Financial Asset Exchange Co., Ltd.

"I believe some sectors may even outperform the United States and Europe in three to five years thanks to their innovation-driven growth," Gibb added.