Chinese factories are increasing production again as the economy picks up steam. This comes as recovery in much of the developed world shows worrisome signs of fatigue.

In the suburbs of Shanghai, a toy factory is producing at full capacity. Chinese factories say they have been seeing an increase in demand for exports since the end of 2009.

Frank Shen, manager of Shanghai Tangwei Toys, said, "Countries abroad are slowly recovering from the effects of the economic crisis. The increase of the export tax rebate also has a big effect on us. So with that, in relative terms, it means our profit margins are increased and we are able to take on more orders."

China is expected to report a 20 percent year-over-year jump in industrial output for December. This would be the fastest pace in close to four years.

A global economic recovery and a slew of domestic government stimulus measures have helped factories across China weather the worst of the economic downturn.

Exports leapt over 17.5 percent from a year earlier, and imports surged 56 percent.

But industry insiders say it's time for China to move away from low-cost mass production for export.

James Qian, managing director of Suzhou Etron Electronics, said, "I think companies in China need to look into improving their abilities to design and produce their own products. These factors should all work together to ensure better profit margins. Companies should not put so much weight on mass production of items, which yield a relatively small profit margin. This model is such a risky one that you might not be able to overcome such risks when it occurs."

China's economic stimulus measures have been fairly successful. Heavy public spending on infrastructure launched in the depths of the global financial crisis in late 2008 catalyzed private investment in factories and property. This in turn has been driving demand for manufactured goods.

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