MercoPress. South Atlantic News Agency

Recession and job cuts hit China's toy industry province

The global economic slowdown is starting to impact on China, the world's biggest industrial production centre. As many as half of all toy manufacturers in the Pearl River Delta could go out of business within the next two years an industry expert said on Monday following the closure of the Smart Union toy factory.

Speaking in an interview with the Guangzhou Daily, Wang Zhiguang vice chairman of Dongguan Toy Industry Association said "of the 3.800 odd toy companies in Dongguan, no more than 2.000 are likely to survive the next couple of years". His pessimistic forecast is based on the rising cost of raw materials, soaring overheads the global market slowdown and depreciation of the US dollar caused by a stronger Yuan. Wang believes companies with good financials and their own brands will find it easier to survive while others such as those dependent on OEM (original equipment manufacturing) are more likely to fail. According to figures from the association since 2006 cost of producing toys has risen by 60%, while contract prices have gone up by an average 10%. More over Customs numbers show that Dongguan firms exported 550 million US dollars of toys in the first half of the year, 1.5% off last year, the first drop in 3 years. Christmas orders are also half of last year and following the incident with China made toys and massive recalls, testing fees to access US and European markets have gone up 25% said Wang. Only a week ago hundreds of workers rallied at government buildings in the factory town of Dongguan in recent days to demand unpaid wages after a toymaker closed with the cost of 7.000 jobs. Smart Union, which makes toys for the giant US toymaker Mattel, has gone out of business and Xinhua said the workers haven't been paid since August. In a separate incident, hundreds of people in Beijing scuffled with police outside a government office, the latest victims of a pyramid-style get-rich-quick scheme involving tree plantations to stem desertification.