'The increasing popularity of the Internet impacts significantly on the toys industry in terms of the industry structure and the type of toys,' Mr Yuen says, noting that 40 per cent of US children between the ages of nine and 14 have a computer and 22 per cent regularly use the Internet.

'Such development implies that an increasing amount of time will be spent on the Internet and displaces time that might have been devoted to play. This enhances children's technical competency and opens up new horizons in entertainment, communications and learning.'

The Toys Fair and Games Fair will be held concurrently with the International Stationery Fair at the Hong Kong Convention and Exhibition Centre in Wan Chai from today until Friday.

More than 1,760 exhibitors will present their wares at the combined event to more than 26,000 expected buyers. At the Toys & Games fair, first time exhibitors Philippines, Sweden, Ukraine, Vietnam and Russia will make up some of the 29 countries and territories represented, enhancing the global profile of the event, which ranks as the largest of its kind in Asia and third largest worldwide.

Participating nations Germany, Spain, Italy, Thailand, South Korea, China, Taiwan and Pakistan will host individual group pavilions.

The International Stationery Fair, jointly organised by the TDC and Messe Frankfurt, will feature 150 exhibitors from 14 countries and regions, including group pavilions by China, South Korea, Taiwan and Thailand.

Toys and games are Hong Kong's largest export category. Statistics show that the gross output of the Hong Kong toy industry reached HK$670 million for the manufacturing year ending 1999.

The industry directly employed 1,686 people among 317 manufacturing establishments. The major export markets by size are the United States, Japan, Britain, Germany and Canada.

Reflecting the export toy market's role in the local economy, Hong Kong exhibitors this year have snatched up 972 exhibition booths.

Despite an economy that officially slipped into recession this year, the United States continues to be the main buyer of Hong Kong-produced toys.

In the first nine months of the year, exports to the US declined 19 per cent, but America still accounted for 47.8 per cent of all Hong Kong toy exports.

Exporters worried about a protracted downturn in the US might want to turn their sights on Japan, which reversed the trend, increasing its imports by 5 per cent over the year-earlier period. Japan ranks as the only country in the top seven importers to record an increase of toy shipments from Hong Kong during the period.

China, which had been identified as a fast-growth market last year, confounded the experts, as its imports of Hong Kong toys declined 39 per cent for the period.

Economists say overall weakness in the global economy accounts for the 15 per cent decline in total Hong Kong toy exports during the first nine months of 2001. Structural weakness in key markets and a growing tendency to ship goods directly from Chinese factories to export destinations are causes for the depressed SAR cargo volume figures.

'Structurally, the continued trend of Hong Kong manufacturers producing in the mainland to shift re-exports to offshore trade, with toys increasingly shipped directly from the mainland or transhipped via Hong Kong, has reduced trade going through Hong Kong,' Mr Yeung says.

'This serves to reduce the volume growth or cargoes going through Hong Kong, thereby depressing re-export growth. Further hurting matters with rising competition, overseas buyers have exerted intense price pressure on Hong Kong manufacturers.'

To reduce operating costs, the majority of Hong Kong toy makers have set up production facilities offshore, mainly in China and in other low-cost countries such as Thailand, Malaysia and the Philippines.

In the wake of this relocation trend, many toy companies in Hong Kong have been reclassified as import-export establishments.

While the manufacturing base might be hollowing out, industry experts say Hong Kong's role is shifting up the value chain towards quality control, marketing and product design.

Using high-tech computer-aided design methods, Hong Kong companies have made significant inroads creating products under licence for international brands such as Mattel, Hasbro and Bandai.

Special events at this year's fair include the seminar 'Hazardous Products Act & Hazardous Products (Toys) Regulations in Canada'.

The talk, presented by Kendall Woo, acting regional product safety manager, Health Canada, will examine important trade measures and product specifications affecting trade with Canada.

In general, product requirements are becoming more stringent in overseas markets, mainly in product safety and environmental protection.

To enhance understanding of the toy retail market in China, a one-day study tour to Shenzhen has been arranged on Saturday.

Those interested in learning more about market activities affecting the stationery industry can attend a number of seminars this afternoon between 2.30 pm and 4.40 pm in rooms 404-405.

Yohei Ogawa will speak on the stationery and office products industry in Japan; Edward Sun will present on the topic of 'The Supply Chain Of Office Products In China'; and Wang Ming will discuss 'China's Accession Into WTO And Its Legislation And Administrative Reform.'