“Of the 3,800-odd toy firms in Dongguan, no more than 2,000 are likely to survive the next couple of years.” Based on the rising cost of raw materials, soaring overheads, the slowdown of global market and depreciation of the US dollar, Wang Zhiguang, vice-chairman of the Dongguan Toy Industry Association said so in an interview with Guangzhou Daily. He also pointed out that companies with good financials and own brands will be easier to survive, while those dependent on OEM (original equipment manufacturing) are more likely to fail.

According to figures from the association, the total cost of toy production has been up about 60 percent, while contract prices have risen by just 10 percent. What is more, according to local customs bureau, Dongguan firms exported $550 million worth of toys during the first half of this year which has fallen 1.5 percent compared with last year. This is also the first drop for three years.

The boss of one toy factory in Dingguan, who do not want to be identified, told China Daily that he dare not say too much about the demise of Smart Union. But what he could tell is the toy manufacturers like them have been through very hard time. He was even not sure whether his company would survive or not. The tighter capital chain or things like that have already shed some negative impact for toy makers.

One owner of a firm that sells Christmas trees is worrying about their storage next winter. “One of the main problems is that many toy makers in Dongguan rely too much on orders from the US and Europe. The financial crisis there has led directly to a reduction on orders,” he said, “also, after the EU and the US changed the market threshold for China-made toys, and because of the recall incidents of 2007, our testing fees have gone up by about 25 percent.”

Xiao Senlin, Chairman of Hayidai Toys Co Ltd said in an interview with Nanfang Daily, it is a challenging time. Focusing more on the domestic market and developing own brands instead of depending on OEM may be a way out.

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