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 ¡ª 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 labor-intensive model that made China the world¡¯s largest exporter of goods.