By Royston Chan
DONGGUAN, China (Reuters) - Hundreds of workers gathered outside a bankrupt toy maker in south China on Friday to demand unpaid wages as the global economic crisis worsened the outlook for an industry already threatened by falling exports.
Factories in the once-booming southern Chinese province of Guangdong have suffered over the past year and a half from tight curbs on loans, rising labour costs and China's stronger currency, which makes their products more expensive.
Hong Kong-listed Smart Union Group, one of the area's largest toy makers, said on Friday it would wind up operations and that provisional liquidators had been appointed.
It had tried to beat the downturn, by taking on more orders as smaller factories closed, local media said. It over-extended even as demand worsened, thanks to the global credit crisis which could drag rich consuming countries in the west into recession.
"The main reason for the closure is that we are too dependent on the U.S. market, which has become sluggish," the China Daily quoted Smart Union human resources staffer Xu Xiaofeng as saying.
Smart Union, a supplier to Mattel, had not paid its 6,500 employees in the export-oriented southern city of Dongguan for two months, the China Daily reported.
About 1,000 workers gathered at the factory in Zhangmutou, before moving on to local government offices guarded by about 100 policemen. Many said they had worked for the company for years.
"I feel very agitated. I have waited for a few days now, we need money to pay for our housing and food," said worker Huang Luohui, 33, who is owed two months' wages.
"Some people say the company has folded and that the boss has fled... The government said they'd resolve the problem in three days. Today is the third day and we've seen no reply from them."
Riot police with batons and shields stood in front of the factory gates, where a notice read "because business is bad, we are unable to give you your salaries."
DARKENING PROSPECTS
Smart Union was an aggressive toy maker that counted some of the biggest U.S. brands among its clients. It went public in September 2006, but hit hard times as raw materials prices rose while summer flooding caused millions of dollars in damages.
In late September, it reported a loss of more than HK$200 million (14.9 million pounds) for the first six months of the year. Its debt totalled over HK$500 million at the end of June, exceeding its assets.
Its shares closed at HK$0.099 a share on Wednesday and did not trade on Thursday. They have lost 94 percent of their value since the beginning of the year.
Smart Union could not be reached for comment on Friday.
Dongguan earlier this month set up a 1 billion yuan ($146.4 million) rescue fund for small and medium-sized businesses hurt by the global economic crisis.
The number of Chinese firms exporting toys overseas halved in the first seven months of 2008, compared to the year before, the General Administration of Customs said on Monday.
The number of visitors to the Canton Fair, the top trade fair which is a barometer for China's foreign trade, was down sharply this week, indicating stiffer competition for export factories in months to come.
($1=6.830 Yuan)
(Additional reporting by Alison Leung in Hong Kong; Writing by Lucy Hornby; Editing by Nick Macfie and Valerie Lee)
