Protection measures introduced by foreign countries and the rise of production costs are reducing the already thin profit margins for Guangdong's toy manufacturers.

"We have worries every year. We worried about the short supply of workers last year and now we are concerned about the foreign market shrinking due to trade protectionism in many western countries," Lin Ruorong, owner of a toy factory in the city of Zhongshan, told China Daily.

His factory manufactures stuffed toys for export to Europe and the United States.

"The US's toy imports from China have been decreasing over the past couple of years and the European Union has raised its market threshold for China's toy products," he said. "That means my business is hardly able to survive."

Many other toy manufacturers in the province have also been feeling the pinch.

As well as increased protectionism in the US and the EU, where most of Guangdong's toys have been exported, Russia, Mexico, Brazil and Argentina have recently introduced anti-dumping measures against toy imports from China, citing various excuses, according to Li Zhuoming, deputy chairman of the Guangdong Toy Association.

"As Guangdong makes the lion's share of China's toy exports, the unfavourable export climate will undoubtedly have a very negative impact on the province's toy industry," Li said.

Official statistics indicate that China supplies over 70 percent of the world's toys and the province of Guangdong alone makes about three-quarters of the nation's toy exports.

Li said problems in the export market will force manufacturers to turn to the domestic market, which will intensify competition on the mainland.

What was worse, Li said, was that the price rise of raw materials and the rise in workers' wage will further narrow profit margins this year.

For example, he said the current price of plastic is 23 percent higher than a year ago, and wages for toy workers has risen by about 20 percent in the same period.

It is time for toy makers to spend more on innovation and shift production to technology-intensive toys to tap into new markets, he said.

He said that the provincial toy association will organize an international toy and gift fair in Guangzhou from April 9-11 to help domestic toy makers. Buyers from new and promising markets will be invited.

He said that Southeast Asia, with a population of over 500 million, will be one of the target markets.

Li's view is supported by Cai Lidong, vice-general manager of Guangdong Audley Toy Co Ltd, a well-known toy supplier based in Shantou, a city in the east of the province.

Cai said he expected the rich variety and competitive prices of the province's toys would make them popular in these countries.

(China Daily March 16, 2006)