In the past three decades, Chinese economy has been arresting the worldwide attention for its double-digit growth rate. Playing a leading part in general economic development, Chinese manufacturing has been contributing a substantial portion in the total GDP growth. However, a national key project, the Research of China National Manufacturing Strategy, has found in the last several years that Chinese manufacturing has already lost its competitiveness due to the void of cheap labor force (New Labor Law in China), the rising costs of raw materials and energies, and the more rigid requirements for environmental protection. Chinese manufacturing has met its Waterloo and calls for an urgent business transformation if it wants to survive and sustain its development. Based on fundamental research, authors of this paper propose a new business conceptual model, SERVICE-MANUFACTURING, which focuses on the seamless marriage of service and manufacturing and how this new model can be implemented in real business practices.