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The toy exports in south China's Guangdong province, a global key toy making base, have shown signs of recovery and are expected to remain stable, according to the provincial customs.

"The toy industry still has its international market despite the adverse market environment," said Li Zhuoming, head of Guangdong Toy Association.

"The exports will keep stable and more factory closures are not expected," Li said.

In the first three quarters of this year, the toy exports reached $4.47 billion, a year-on-year increase of 6.3 percent. But the growth rate dropped by 16.2 percent compared with the same period last year, according to the provincial customs statistics.

The second half is usually the peak season for toy exports. The export volume in September rose by 17.7 percent to $840 million.

The Hong Kong/Taiwan-funded companies doing processing trade still report growing exports while those doing common trade had shrunken exports.

During the first nine months, the province exported $3.15 billion of toys by processing trade, up 4.8 percent year on year. The export by common trade, however, reduced by 6.6 percent to $530 million. The export by processing trade accounted for 70.6 percent of the province's total toy exports.

The drastic fluctuation in toy exports since late last year had resulted from rising raw material and labor costs, the yuan's appreciation and an export tax rebate decrease on toys last July.

Large-scale quality recalls also hurt the industry as western countries raised quality standards and issued several recalls on Chinese toys last year. China conducted special campaigns to improve toy quality and banned many unqualified companies from exporting.

As entertainment goods, toys are most vulnerable to financial crisis.

Guangdong's toy exports to the United States and Hong Kong, the province's main importers, dropped by 2.5 percent and 13.9 percent respectively during the first three quarters.

The General Administration of Customs said in a report last week that 3,631 toy exporters, about half of the industry's businesses, shut down in 2008. In Guangdong, 1391 factories engaged in toy exports closed during that period.

Experts said falling orders and a shrinking workforce are inevitable for toy exporters in the economic slowdown. But the number of toy makers in Guangdong will remain stable and they are expected to develop to larger scale with more competitive strength to resist crisis.

The country's Ministry of Finance adjusted export tax rebates on more than 3,000 items last week to counter the slump. Starting November 1, the export tax rebate on toys will be raised from 11 percent to 14 percent, which may help to revive the sluggish toy export market.