Santa’s workshops (in China) go bust


Growing up in the Chinese countryside with only an elementary school education, Yang Yanjun had never heard of Christmas until she landed a job painting pink-cheeked cherubs to decorate trees.

But Christmas proved to be a miraculous holiday that would utterly transform her life. Over a decade, she worked in factories producing ornaments and toys that foreign children were told came from Santa’s workshops. She earned up to $200 a month, unimaginable riches that allowed her to build a house for her family back home.

Now the Christmas miracle has gone bust.

The financial meltdown that has thrown so many American families into crisis might be even worse on this side of the world. The precipitous drop in consumer demand has translated into a wave of factory closings that have spit millions of Chinese workers out into the ranks of the unemployed. The fallout is most obvious in Dongguan, a southern Chinese city that, despite its palm trees and sultry climate, may be the real-life North Pole.


Until recently, Dongguan had 3,800 toy factories, producing a staggering 30% of the world’s toys. The Dongguan Trade Assn. estimates that 1,800 of them have closed or will close in the coming months.

The 37-year-old Yang lost her job making hairpieces for Barbie dolls in October, when Smart Union Toys abruptly closed down. A major supplier to Mattel Inc. and Disney Co. with 7,000 workers, it had been one of the largest employers in town. Now there are only a few security guards who watch over a courtyard strewn with empty toy boxes and soggy plush dolls, a scene looking like the morning after a Christmas party gone awry.

Most of the workers, migrants like Yang who came from central China, have gone home. Houses are empty, shops shuttered. The neighborhood looks like a ghost town. But Yang has stayed on looking for work, desperate for money to support her 13-year-old son and elderly parents who live near the city of Chongqing.

Every morning and every afternoon she goes out, walking past the padlocked gates hoping to find a factory still in business and perhaps hiring.

Notices are taped to some of the gates, but with too many people chasing too few jobs, employers are picky. The notices specify young workers with high school educations and computer skills. Some require that men be at least 5 feet 9 and women at least 5 feet 1. Height is one of a number of obsessions in the workplace here.

“No, nothing for somebody like me,” says Yang, a ruddy-faced woman whose toothy smile stretches wide across her face, even as she peers at another notice saying job applicants must be younger than 30.

After the toy factory closed, she got a job at a shoe factory. But she was fired after five days when the boss realized she needed to wear eyeglasses. Then a job at a handbag factory lasted only 12 days before it closed because of a lack of orders.

“In the past, you didn’t need skills to get hired. The factories just needed workers and they would take anybody,” Yang said.

China has not released figures on job losses, but the influential magazine Caijing quoted an unnamed Labor Ministry official saying that 10 million migrant workers had lost jobs this year through November. Nearly 5 million of those workers had already returned to their hometowns.

Dongguan’s residents, most of whom came from elsewhere to reap the rewards of the manufacturing boom, liken the situation to a wave that has spread around the globe.

“First, you had banking problems in the United States, then factories closed, and now we have lost our jobs. It is an economic tsunami that has now hit us,” said Han Guoren, 24, a laid-off toy factory worker who was selling Santa Claus hats (salvaged, he said, from a closed factory) in downtown Dongguan.

The entire Pearl River Delta, the manufacturing hub that extends from Hong Kong to Shenzhen and Guangzhou, is suffering. But toys are particularly vulnerable. Even before the downturn, the industry was reeling from product recalls. Toys are almost entirely an export industry, with 90% of the product shipped overseas. Profit margins are tight and consumers fickle.

“Nobody is doing well at the moment, but toys are really hurting,” said Christopher Devereux, a British business consultant whose company, China Savvy, is in Guangzhou. He says that many of the toy manufacturers, faced with rising costs and mounting losses, decided to pull out.

“This is a city of not only migrant workers, but migrant entrepreneurs,” Devereux said. “They literally disappear into the night.”

Even larger factories went poof. Smart Union employees had been working overtime to fill Christmas orders when they learned that the top managers had fled to Hong Kong. The municipal government had to fork out more than $2 million to pay the wages they were owed.

“Nobody could find the bosses,” Yang said.

Other migrant workers were not so lucky. When their factories went bust, they were left without their final pay and without lodging, if they had been boarding in a company dormitory. In some cases, they lacked the money to get home.

“Let us help you go home,” read giant red billboards around Dongguan erected by a private company that is helping migrants raise train fare.

If anything, industry insiders predict that next year will be worse. The orders for this Christmas season came in months before the impending financial debacle was obvious.

“Toys are a happiness business,” said Leung Chung Ming, managing director of Lung Cheong International Holdings, a company with a large factory in Dongguan that specializes in remote-control toys. “If there is no good news, if the market situation is tough, people don’t want to buy a $99 toy for their child.”

The Chinese government has promised to take measures to spur domestic consumer spending, with the hope that it will help pick up the slack. But Chinese consumers are unlikely to bail out the beleaguered toy industry.

Although many Chinese have come to love Christmas, decorating trees and windows, piping the ubiquitous carols into elevators and stores, one thing they don’t do is shop. The big consumer holiday here is the lunar New Year -- and parents buy clothing and shoes for their children, not toys.

“All these toys we make are for the foreign children,” said 40-year-old Long Sunjun, who runs a small shop near the closed Smart Union factory. She says that even the children of the toy factory workers seldom were given toys other than squirt guns or balls.

“Chinese kids can make their own toys. Besides, they should be studying, not playing with toys.”


Eliot Gao of The Times’ Beijing Bureau contributed to this report.