High-end manufacturing holds the key

Other risk factors for China include rising labor and land costs, the increasing competitiveness of other emerging markets, and a trend of relocating industries from developing countries to developed ones.

However, the decline in China's working-age population is something that most economists would not have anticipated as it comes three years ahead of the previous predictions made by the World Bank. The country's demographic dividend - when the largest section of society is of working age and the dependency ratio is low - has contributed to more than 30 percent of its rapid economic growth, an earlier World Bank report said.

In real terms, what the decline in working-age population means is that the endless supply of low-cost labor from China, which accounts for more than 11 percent of the world's exports, is no longer a reality, but a memory.

Wu Yu, a manager at a Suzhou-based factory, is one of several Chinese businessmen who have been affected by recent developments. Labor shortage and rising labor costs are the main challenges for Wu's company, a unit of the Taiwan-based computer maker Pegatron Corp.

Wu said that most of his employees were born after 1990 and work on average seven months before they seek fresh prospects with other companies.

"These youngsters are more ambitious and have bigger dreams than their parents. They want to explore the world and leave the job when they find it boring," he said.