Children play with wooden toys in Linyi city, East China's Shandong province, July 23, 2014.[Photo/IC]

Producing more than $453m worth of goods annually, companies in one county are adapting fast to change, reports Xu Wei in Yunhe, Zhejiang

China Daily is releasing a series of reports focusing on those who are devoted to development at the grassroots level.

Every year, as parents select the Christmas toys that could make them the world's best Mom and Dad, few will realize that the machines that made them, or the workers that packed them, were probably from eastern China.

More than 90 percent of the wooden toys produced in Yunhe county, in eastern Zhejiang province, are exported to the European Union and the United States.

With a toy production history dating back 40 years, the county now accounts for one-third of China's wooden toy exports.

Its 732 toy-making companies manufactured more than 2.77 billion yuan ($453.1 million) worth of toys last year, however, new challenges are mounting, most obviously the rising cost of labor and stagnating global demand.

"The time has passed when wooden toymakers made high and quick profits," said Lin Hongbing, chairman of Zhejiang Hongyuan Toy Co.

"Workers' wages are increasing by 10 percent each year, and it is impossible for us to raise the price of our products by that," he said.

Lin said that other costs, too, are rising, such as transportation and electricity. "Inevitably, as a result profit margins can only go lower and lower."

Statistics from the General Administration of Quality Supervision, Inspection and Quarantine show that China's toy exports were worth $24.73 billion in 2013, down 1.64 percent from 2012, as the global market for their goods stagnated.

"Overseas customers are much more cautious. Previously they would take a fixed number of products every year and often over-order, happy to cover that cost. Now they would place orders only for what they know they can sell," said Lin, whose company managed to maintain its normal export level in 2013, about 30 million yuan.

But many firms have not been so lucky.

The majority of the country's wooden toy-making companies are original equipment manufacturers－those that make parts or products that are used in another's end products－which means low added value, or the difference between the price of their finished products and the cost of making them, said Mao Fengming, secretary-general of the Yunhe toy association.

For a toy that is sold at $8 in the US, for instance, a producer in Yunhe is now likely to make around 20 cents.