Christmas product makers in Yiwu, a world-renowned distribution center for merchandises, has reportedly started to replace Santa's cotton jacket with one made of synthetic fiber and fill Santa's belly with sand instead of cotton wadding.

The changes are due to the rising prices of raw materials and labor.

Whether consumers in the US, where 70 percent of Christmas-related products are made in China, will welcome the jerry-built Santa is unknown. However, China is bidding farewell to the era of cheap costs, which is especially true while the country is undergoing a new round of inflation.

Recent government data shows that the CPI rose 5.1 percent in November, the fastest rise since July 2008. Without a price advantage, what is the key to sustainable economic achievements in the future? The answer is for sure: innovation.

This is nothing new. During the global financial crisis, many proposed that China should take the crisis as an opportunity to promote innovation and move toward the upper reaches the industrial chain. But China needs to act quickly.

Statistics show that in 2010, 71.9 percent of China's population is now between 15 to 64 years old, and this age bracket is usually considered to make a purely positive economic contribution. This group will gradually shrink, as the country starts aging.

China must find an alternative to prop up its economic growth. Over the past three decades, the nation largely relied on cheap labor and low production costs to boost the economy. It is high time for the traditional economic engine to adjust to modern conditions.

China doesn't lack innovative minds. We can see brilliance in music, film, sculpture, fashion, the arts and other fields.

However, many accomplishments are individual ideas, rather than systematic creations. Without effective innovative mechanisms in private enterprises and other organizations, unique productivity will never emerge.

Transforming from the world's manufacturer to an innovative power is bound to be a long and painstaking process. In the predictable future, copycats and innovators will coexist in China. Toward which trend China's economy sways will determine whether the nation's developing capacity becomes ossified or energetic.

Some observers hold that China is catching up in advanced technologies, while others argue that the China is taking a short-cut, as it seeks to trade capital and its market power for others' intellectual property.

No matter what others say, there is no short cut to developing core technology and creating effective innovative mechanisms.

China must demonstrate its innovation. That's the only way to consolidate the second-largest economy and the biggest market in the world.