Officials are urging toymakers to cooperate with animators to boost the sector's flagging fortunes, the Shanghai Securities News reported.

China's toy making industry has had a tough year. A massive toy recall dented confidence in the sector's exports, and exports took a further hit from the global financial crisis emanating from the US sub-prime mortgage crisis.

Guo Zhong, an official with the Ministry of Commerce, said in a recent interview that China's struggling toy industry should team up with the country's animation and innovation industries to lead a broad sense of development. The toy makers felt the suggestion was a good idea, but hard to follow.

The toy section was among the least popular businesses at the 104th Canton Fair, whose first round concluded last week, despite the export tax rebate on toys being raised three percentage points to 14%.

A Guangzhou toy maker surnamed He said the rebate hike was meaningless given his company received much fewer orders than usual from American and European buyers.

Guo said the problem facing toy makers was that the orders typically placed with them will make them lose money if filled, while profitable orders were rarely seen. "So, the more orders they get, the more money they will lose," he said.

Industry watchers said Chinese toy makers cannot pass on rising costs to buyers because of fiercer competition. Raw material costs for toy making have grown 60% this year, well below the 10% increase in prices for finished products. Mr Sun, general manager of a fluffy toy maker in Zibo, Shandong province, said the company could barely beat its breakeven point.

"To weather the hard time they [toy makers] should have a brand new mindset," Guo argued. "For instance, partnership with animation and innovation industries could be a good way out."

Guo showed his regret that China did not seize the opportunity of greater exchange with American culture. "We exchanged The Nine-Color Deer and Three Monks, the most watched homegrown cartoons, which also have educational significance, with America's Transformers, which became an immediate success across China in the 1990s.

"Unfortunately, what we saw afterwards was a one-direction exchange with more American cartoons like the Teenage Mutant Ninja Turtles coming in without the export of China-made cartoons," Guo said. "This was a precious opportunity missed."

Mr Sun agreed with Guo's advice but said it required cross-industry cooperation. "The reason Disney-related products sell well is they contain cultural elements that Chinese toys do not," Sun explained. "Disney-related toys are not merely toys but are a component of a value chain that is built by strong management and excellent corporate credibility."

This article initially appeared in Chinese in the Shanghai Securities News on October 27, 2008. The China Perspective takes no responsibility for the accuracy of the original article.