Glad tidings

With the potential of more icebergs ahead, many firms are thinking of jumping ship.

"I have been considering transferring to other industries since the beginning of this year," admitted Chen, who said conditions have slowly deteriorated over the last decade.

Huang said Jiaying Arts and Crafts has already started producing toy helicopters to sell to the domestic market.

Despite the turbulence, some big players, like Hongfeng Arts and Crafts, are still flying high, however.

"We completed $15 million worth of orders this year, almost twice as many as in 2009," said deputy general manager Luo, who added that his company's net profit margin is as much as 10 percent higher than the industry average.

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The secret to Hongfeng's success has been building a brand recognized by foreign buyers, which has attracted large retailers and has kept annual orders at a healthy level.

Small and medium-sized factories often cannot meet some of the more stringent requirements on quality and environment protection, while retailers are usually unwilling to buy from smaller firms because they are less reliable.

"We increased our added value by providing abundant and various designs and by using different materials," said Luo, whose company has 36 designers, including four from overseas. "It is essential for manufacturers to be courageous, invest huge amounts of money into innovation and protect the intellectual pro-perty by applying for patents."

Orient Crafts in Zhejiang also saw its sales top 100 million yuan in 2010, an increase of 25 percent.

"There is no bad industry, just bad performing companies," said general manager Huang Jili.