The top three manufacturing powerhouses are the United States, Germany and Japan, according to the report, 2015 China Manufacturing Development Index.
It said China has been bridging the gap between it and the front runners since 2000.
"Manufacturing forms solid ground for a strong nation and it is crucial to upgrading China's economy," said CAE President Zhou Ji.
A year ago, China's State Council unveiled a 10-year plan entitled "Made in China 2025" aimed at modernizing China's manufacturing. It set a target of China matching Japan and Germany's manufacturing standards within 10 years.
There are still huge obstacles for China to overcome in order to meet such goals, including excess capacity and inferior production quality, the report said.
It also pointed out that China needs to change a status quo where many key industrial techniques are still monopolized and controlled by the West.
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