Their parents made China the factory of the world. Can children save the family business?

By David Kirton

RUICHANG, China (Reuters) – When Steven Du took over his parents’ factory producing climate control systems in Shanghai, one of the first changes he made was turning on the heating in the factory in winter – something his frugal ancestors were reluctant to do.

“If you don’t improve their environment, workers aren’t as happy and it’s harder for them to do their best,” the 29-year-old said. “The change is worth the extra cost.”

Du, like tens of thousands of other young Chinese factory bosses, inherits a grassroots manufacturing enterprise that can no longer rely on the labor-intensive model that has made China the most largest exporter of goods in the world.

According to Chinese academics, a shrinking and aging workforce and competition from Southeast Asia, India and elsewhere make at least a third of China’s industrial base – low-tech manufacturers range – obsolete.

This do-or-die mission of technological upgrades and practical changes falls largely to a group of people in their 20s and 30s known as “chang er dai”, or “the second generation factory “, a play on the pejorative term for spoiled, rich children, “fu er dai”.

“If I change dai, I’m trying to save my family business from bankruptcy,” said Zhang Zhipeng, a research assistant at the Shenzhen High-Quality and New Structure Development Research Institute, who believes that ‘about 45,000 to 100,000 of this cohort is in various stages of resumption of one-third of China’s private manufacturing enterprises.

The large-scale generational transition, which comes as China’s growth outlook dims, is the first in the country’s private sector since the dai changer’s parents became industrialists in the decades after his death. Mao Zedong 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 improvements while facing challenges such as labor costs , shortage of workers and, in some cases, disagreements with relatives about the best course of action. .

Du spoke on the condition that his company not be named to protect the privacy of his semi-retired parents, who he said were in their 50s and left the factory business largely to him.

Like his peers, Du grew up with a level of comfort and opportunity his parents never dreamed of.

He went to high school and college in New Zealand, majoring in electrical engineering. He moved to the United States, working in the Wisconsin facilities of Apple supplier Foxconn. He studied Taiwanese and Japanese production methods, focusing on reducing inefficiencies.

Those skills would come in handy at a factory that the Chinese state established in 1951 and privatized in 2002.

His father’s business acumen and his mother’s hard work helped make the factory a supplier to major Chinese home appliance companies. 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 specialized industrial software that covers accounting, orders, purchasing, deliveries and other previously managed processes. by humans, Du said.

He reshaped the floor of the factory to allow forklifts to move easily, grouping storage and production units differently to minimize physical exertion for a workforce whose average age is about 50 years old. A worker now travels 300 meters to perform the most complex tasks, compared to a kilometer, and needs less than a third of the time to do so.

While his mother spent long hours micromanaging production, Du finished most days around 4 p.m. in a gym he set up inside the factory and allowed workers to use it before to go home.

“Young people like to be lazier, but laziness is actually a manifestation of progress,” he said.

Du has raised wages by 10-20% over the past three years to keep staff turnover below 5%, but says his factory is 50% more efficient.

“Factories have to upgrade to high-end manufacturing or are doomed to fail as their costs rise,” said Zhang, the researcher.


Zhang Zeqing believes he has achieved a similar efficiency gain by digitizing processes since he started co-managing their egg products factory in Ruichang, a southeast city, with his parents.

At Ruichang City Yixiang Agricultural Products, workers in green uniforms place duck eggs into cups attached to a conveyor belt that feeds a vacuum packing machine. A new screen above the machine shows the speed at which eggs are sealed and estimates the average output per worker, as well as the time and labor required to pack 10,000 eggs.

Barcodes track all products from farm to factory to store, allowing supervisors to monitor orders, production and delivery on their phones and make decisions based on real-time data.

“Before, we recorded all this by hand on paper,” the 30-year-old said. “All the internal data was confused. This led to a lot of waste.”

Like five of the other chang er dai who spoke to Reuters, Zhang never planned to take over the factory. He wanted to study landscape in France.

But he felt he had to step in, at least for a few years, and convince his parents, now 55, that technological upgrades and the establishment of new distribution channels on commerce platforms electronics were worth the investment.

Something had to be done, he thought, because “frontline workers are aging and young people are less willing to work on the frontline.” China has record rates of jobless young people, but many of them have university degrees and prefer not to work in factories, even if they accept jobs below their level of education.

Zhang’s parents resisted at first, not wanting to spend money on a business they thought was doing well. But they eventually gave in.

Sales have increased 35% per year since coming on board.

“I sometimes wonder why our e-commerce succeeded while others failed. A manager of a company told me that because you are your mother’s son, she will support you infinitely, that is- that is, even if you fail,” Zhang said.


Certainly, China as a whole is modernizing its industrial complex more significantly than the changes implemented by young factory managers like Du and Zhang.

Some segments, such as the heavily robotized electric vehicle industry, are disrupting global markets with state subsidies, as well as foreign capital and know-how.

Chang er dai, however, is helping lift the bottom, which is also important for preserving China’s share of global manufacturing, two industry experts told Reuters.

Some of the technology introduced by Zhang comes from Black Lake Technologies, a company founded by Zhou Yuxiang, which has more than 1,000 chang er dai among its customers.

“Over the past few decades, the model of many Chinese factories was based on revenue growth, so very few of them paid attention to production efficiency or digitalization,” the man said. 34 years old, who also considers himself a chang er dai. he does not run his parents’ business.

“They usually manage their operations using stacks of paper. More advanced factories may use Excel, but that’s it.”

Tian Weihua, an academic specializing in manufacturing upgrades at the Science and Technology Innovation Research Institute, a government think tank, says technological know-how and foreign experience change their dai give a better chance than their parents to maintain business competitiveness in a new environment of higher costs, weaker external demand and emerging manufacturing centers in cheaper and less developed countries.

But “upgrading technology does not cure all ills,” Tian said, adding that other measures will be needed, especially in product innovation.

Not all changing dai will do this.

After studying textile design at the University of the Arts in London, Zhang Ying, 29, took over his family’s garment factory in the eastern city of Ningbo in 2017.

But the company was in trouble. Salaries had more than doubled in a decade, to more than 7,000 yuan a month. Workers, mostly migrants from the interior provinces, were scarce. She wouldn’t dare fire them.

Last year, she took time off to have a child and left other managers in charge. She has no intention of coming back.

“It was too difficult: the pressure was too sudden and too strong. I had hives from stress and needed to take medicine for a year, so I stopped,” he said. she declared.

(Reporting by David Kirton; Editing by Marius Zaharia and David Crawshaw)

Leave a Comment