China's manufacturing industry is going through a period that can best be described as evolutionary, according to Bradley Feuling, CEO of Shanghai-based Kong and Allan, a supply chain consulting firm. Many Chinese manufacturing companies, he explains, were launched when the Chinese government began offering a value-added tax (VAT) credit reimbursement to encourage exports. A year ago, however, China reduced or eliminated the VAT export rebates for some industries. As a result, though you don't hear it reported much in the United States, some Chinese manufacturers are operating now at a loss, and many have been severely impacted.
Source: Industry Week, http://industryweek.com