Every year about 10 percent of the toy makers in Shenzhen, one of China's leading toy makers, quit the market due to increasing costs and international trade barriers, but experts refute the idea that the Chinese toy industry is suffering a downturn and claim that these factories' closedown mainly resulted from their own operational problems.

The strong growth in toy exports helped to remove those worries. In January and February, China's toy exports totalled US$1.06 billion, an increase of 45.6 percent year on year. Toy exports reached US$500 million in February alone, up 83.3 percent from 2005. Exports to Canada and Russia rose 120 to 180 percent to US$14.63 million and US$13.25 million respectively in February.

It is normal and unavoidable that some small and uncompetitive toy companies did not manage to survive, and it is good to the development of the whole industry at an adjusting stage, said Wang Tie, secretary general of the Guangzhou Toy and Gift Industry Association.

As a labour-intensive industry, toys' production costs are mainly for raw materials and pays for workers. The Chinese currency appreciated over six percent last year, which made toy makers spend more on raw materials and pays.

The United States and the European Union (EU) are major markets for Shenzhen toys. They largely raised the threshold for toy imports by setting stricter environment and safety standards. The US banned the imports of man-made wood Christmas trees in 2006, and the EU began to levy waste electronics recycle fees in 2006, which caused electronic toy costs to rise 15 percent.

The toy association is expected to set up a cartoon industry association this year, Wang said. Toy makers will cooperate with cartoon makers and make innovation in high value-added products.