This year, there has been no buying spree in Yiwu Small Goods Trading Center, where hordes of overseas visitors normally purchase large quantities of handcrafts for Christmas gifts every October.

In the center, goods are piled high in a store where a shop owner called Cheng watches DVD movies and chats online to kill time. According to the owner, orders have declined sharply this year and some factories have had to offload 20 percent of their staff. At the same time, some handcrafts sellers have had to rent their stores to break even.

According to a report in Shanghai Morning Post, this year has seen a 20 percent drop in the number of businesses participating in the Yiwu International Commodities Fair. "The fair is a barometer of the whole industry," an anonymous official in charge of the fair told the newspaper.

As with Yiwu, consumer goods traders in Shenzhen face the same problem. Business margins have tumbled from 10 to five percent in a year due to increased labor costs, soaring material prices and the overseas financial crisis.

Mei Xinyu, deputy researcher of the Chinese Academy of International Trade and Economic Cooperation of the Ministry of Commerce, said "The financial crisis is having a negative impact on a substantial part of the economy through international trading, in which Chinese manufacturing plays a big part."

Domestic manufacturers are finding ways to cut their losses. Some enterprises are targeting markets outside the United States and Europe to net profits for their Christmas products. "They have done a good job," said Cheng. To protect businesses from the sluggish market, local governments are offering subsidies to encourage factories to manufacture high-value products. Moreover, traders in small goods are getting free language training before contacting Korean, Japanese and Arabian businessmen.

(China.org.cn by Wu Jin October 16, 2008)