By David Kirton
RUICHANG, China (Reuters) – When Steven Du took over his parents’ factory producing temperature control systems in Shanghai, one of the first changes he made was to turn on the plant’s heating in winter – something his frugal forebears were reluctant to do.
“If you don’t improve their environment, the workers aren’t as happy and it’s harder for them to do their best work,” the 29-year-old said. “The change is worth the extra cost.”
Du, like tens of thousands of other young Chinese factory bosses, is inheriting a basic manufacturing business that can no longer rely on the labour-intensive model that made China the world’s largest exporter of goods.
A shrinking and ageing workforce and competition from Southeast Asia, India and elsewhere are making at least a third of China’s industrial base – the low-end manufacturers – obsolete, Chinese academics say.
This do-or-die mission of tech upgrades and practical changes largely falls on a group of people in their 20s and 30s known as “chang er dai”, or “the second factory generation”, a play on the derogative term for spoilt, rich children, “fu er dai”.
“If I’m chang er dai, I’m trying to save my family business from bankruptcy,” said Zhang Zhipeng, a research assistant at the Shenzhen Research Institute of High-Quality Development and New Structure, who estimates roughly 45,000 to 100,000 of this cohort are at various stages of taking over up to one-third of private Chinese manufacturing firms.
The large-scale generational transition, which comes as China’s growth prospects dim, is the first in the country’s private sector since the chang er dai’s parents emerged as industrialists in the decades after Mao Zedong’s death in 1976.
Reuters interviewed eight chang er dai for this report, who described their attempts to bring family businesses into the modern era with efficiency upgrades while facing challenges such as labour costs, shortages of workers and, in some cases, disagreements with relatives on the best way forward.
Du spoke on the condition that his business not be named to protect the privacy of his semi-retired parents, whom he said were in their 50s and largely leave factory affairs to him.
Like his peers, Du grew up with a level of comfort and opportunities his parents never dreamed of.
He went to high school and university in New Zealand, specialising in electrical engineering. He moved to the United States, working at Apple supplier Foxconn’s Wisconsin facilities. He studied Taiwanese and Japanese production methods, focused on reducing inefficiencies.
Those skills would come in handy in a factory the Chinese state set up in 1951 and privatised in 2002.
His father’s business acumen and his mother’s hard work helped turn the factory into a supplier to large Chinese appliance firms. It also sells components used in temperature-control systems for shopping malls, computer rooms, battery cooling, and medical equipment.
But production processes remained largely unchanged until Du took over in 2019. He introduced specialised industrial software that cuts across accounting, orders, procurements, deliveries, and other processes previously handled by humans, Du said.
He remodelled the factory floor to allow forklifts to drive around easily, grouping storage and production units differently to minimise physical effort for a workforce whose average age is around 50. A worker now walks 300 metres to complete the more complex tasks, down from one kilometre, and needs less than a third of the time to do it.
While his mother spent long hours micromanaging production, Du ends most days around 4 p.m. in a gym he set up inside the factory, and allows workers to use, before driving home.
“Young people like to be lazier, but laziness is actually a manifestation of progress,” he said.
Du raised wages by 10-20% in the past three years, to keep staff turnover under 5%, but says his factory is 50% more efficient.
“Factories need to transition to higher-end manufacturing…
Read More: Their parents made China the world’s factory. Can the kids save the family business?