Your "Z" work visa is attached to one page of your passport, if you loose the passport, the visa goes with it.  But you should worry more about finding more details of how your visa works, then you will be more aware of any possible risks.

A work visa is valid only for 30 days after you enter China.  Then it expires.  This is why you must go to PSB after arrival and before beginning to work and finish the process.  There, you will be requested to go to an approved hospital for a health check and certificate (about 300 Rmb), finish your Foreign Expert Certificate  (FEC) if not previously done, and get your work permit and residence permits issued.  Now, you can legally work in China for the length of your contract, and reside too.

Your residence permit will take over and function as a visa, so make sure you do get one with multiple entries, not one or two entries.  Sometimes it is a paper like your visa attached to your passport, sometimes is in the form of a booklet, depending on location (and separate from your passport). 

Two things are worth knowing about your work permit and residence permit.  THEY ARE TIED TO YOUR CURRENT PASSPORT, AND TO YOUR PLACE OF EMPLOYMENT.  So, if you loose your passport, you first notify local Police Station.  With the complaint number, you go to PSB and they will give you a permit to stay 30 days legally to get a new passport.  Then go to your Embassy and request a new passport.  If besides passport you lost work and residence permits, you must get new ones, and may have to go abroad for a new work visa.  If you just lost passport but still have the permits, then must request a change to new passport number.  If you must leave the country, PSB will have to give you an EXIT Permit to be allowed out.

I think I have covered all basis now, hope you do take care of passport.

I can not give you a definite answer because at different locations in China, the same rule or regulation is interpreted and applied different.  Must go to PSB and explain problem and see what they suggest.  But remember, no need to go back home, go to Hong Kong instead.  Did you have a copy of your passport pages and visa ?.  That should make things easier for you.

Nader:  you are asking me to guess how a Chinese Official at Shanghai's PSB will react to the news of you loosing your passport.  I can not do that, since I have no idea which foot he or she will use to get off the bed.  

Somewhere up above I gave you the procedure when a passport is lost of stolen,   Gather whatever documentation you have not lost, and visit PSB.  Their answer to your inquires will determine what you must do.  My answer will only give you an idea of what will happen, and since at present time China is on a crackdown looking for illegal foreigners (not that you are one), I would guess they will be more prone to act "BY THE BOOK".  

I will place my bets on you having to go to HKG to get a new visa, but I do hope you may resolve it locally.  If you go to HKG, try for a late afternoon arrival, spend the night at a hotel, and be at the Embassy as they open early in the morning,  Pay extra for same day services, and by 2 or 3 pm you can be on your way back to Shanghai.

If you completed all the stuff needed to do for you initial visa then its no big deal.  I lost my passport before in Shanghai, its just a lot of hassle is all.  No need to leave the country though, thats a load of rubbish.

Report your passport missing to your embassy and they will cancel it.

Go to the Entry Exit place in Pudong and report it missing. Go back when they tell you and collect the police report.

Take the police report to your embassy and apply for a new passport.

When that arrives go back to Pudong and they will stick a continuation of your previous visa in your new passport, which again takes a few days and you need to pay for it again.
Then you need to go to your local PSB and update do the stuff again for registering your address.

The whole process was quite quick for me because Brits  can get new passports issued in Hong Kong.  I dont know where you're from or where your new passport can be made so it could take about a month.

i changed my passport in china, caz passport expired. 

and for put my old visa to the new passport i made almost same procedure as i make just new Z visa, (no need go back to your country).

need bring company all documents and Jiu ye zhen, and your new passport to PSB. and they will give you new visa, with new visa number and new expired day.