The rising yuan, escalating production costs and trade protectionism have driven out of the market more than half of toy exporters in China, the world's largest supplier of toys.
A total of 3,631 toy exporters or 52.7 per cent of the industry's businesses shut down in 2008. They were mainly small-sized toy producers with an export value of less than $100,000, the General Administration of Customs said in a report on Tuesday.
Customs data showed only 3,507 toy exporters were still in business.
China saw a remarkable business slowdown as a result of rapid appreciation of its currency, rising human capital and production costs and falling export rebates.
From January to August, the country exported 35.29 billion yuan ($5.17 billion) worth of toys, up 1.3 per cent from the same time period in 2007. However, the growth rate is actually 21.80 per cent slower than that of last year.
According to the customs report, the US credit crisis is part of the reason exports to the US dropped 5.2 per cent to $1.62 billion in the first seven months of the year.
The General Administration of Customs also blamed small-sized toy producers for not adapting to policy and export environment changes. Growing global trade protectionism is another reason the toy industry was hit hard, the report said.
"Last year was the most difficult time in decades for the Chinese toy industry," Xinhua news agency quoted the vice chairman of the China Toy Association, Liang Mei, as saying.
Western countries raised quality standards and issued several recalls on Chinese toys in 2007.
Liang said those standards forced domestic exporters to jack up production costs, thus driving many small-sized companies out of the market.
To repair the image of toys made in China, Beijing banned many unqualified firms from exporting toys.