Toys hit by financial turmoil

China - The toy sector in China is struggling through the global economic downturn, with two toy manufacturers folding in as many weeks.

Chong Yik Toy Company shut down its factory in Shenzhen this week, the South China Morning Post reported. The closure comes days after Smart Union closed its factory in Dongguan.

Smart Union, which manufactured toys for major US retailers Mattel and Disney said it had gone into liquidation.

The toy industry has enjoyed export-driven growth in recent years supplying to major toy retailers globally. But rising labour costs, expensive raw materials and the appreciation of the Chinese currency has dampened demand from the US.

Xinhua news agency said a total of 3,631 small enterprises that made toys for export, or 52.7% of all such companies, had gone out of business in the first seven months of the year.

The Chinese toy sector last year also suffered a loss of confidence, as the industry was put in the spotlight for containing unacceptable levels of lead in its toys that sparked a recall of many China-made toys globally.