While some operators believed that further market cultivation was required, the industry was generally sanguine about the future in view of the huge emerging market in China, and expected demand to grow in developing economies such as Eastern Europe.

Andre Delore, head of Childford, which specialises in educational toys for toddlers and children up to the age of six, said that contrary to common perception, parents in developing economies were more prepared to spend money on educational toys than those in richer, developed economies.

'Our experience in these markets shows that there is a stronger desire among parents in the less-well-off places to equip their children for a better future, making them more willing to invest in educational toys for their kids,' Mr Delore said.

The company's head offices are in France and Switzerland, where the design of toys and related research and development (R&D) are conducted. Its Hong Kong office plays a supporting role in supervising production in the mainland and co-ordinating the export of products to overseas markets.

Hong Kong provides a good regional base for overseas companies producing toys in China because of its geographical proximity to the mainland and its strength in R&D.

Childford markets its toys, which focus on children's cognitive development and creativity, in Europe, Southeast Asia and Hong Kong.

At the end of last year, the company launched its products in Shanghai to spearhead plans to expand on the mainland, optimistic that demand for educational toys would increase across the different markets.

The mainland holds great potential for the firm because of its booming economy and the rise of middle-income families.

While his company had centralised its creative and R&D operations at its headquarters to fully control these critical processes during the start-up stage, Mr Delore said he planned to shift some R&D to Hong Kong now that his business was well in train.

'It is most important to be innovative, because this is what sets you apart from your competitors,' he said. 'Then you need to have strong R&D to help you turn innovative concepts into quality products.

'Hong Kong provides a good R&D platform. I think at least for the coming five years it will be difficult for foreign companies operating in China not to have a base in Hong Kong,' he said, adding that this would create a demand for qualified local staff who were conversant with technological research and related technical disciplines and were able to turn ideas into products.

According to Mutual Fit, a Hong Kong-based company that specialises in the design and manufacture of electronic hardware for toys, over the past two years interactive toys have been in the biggest demand from the major brands it services such as Mattel and Hasbro.

'The learning tool type of toys used to be most popular with the major brands, but musical toys have caught up in the last two years,' said Oswald Chan Kwok-to, Mutual Fit's sales director. 'Judging from our assignments from these brands, interactive musical toys will remain hot in the coming years.'

In line with this trend, the company has developed a focus on integrated circuit technology for different voice and music applications, in addition to its other specialisations in microcontroller programming and LCD game development.

'Educational toys are generally more sophisticated and increasingly involve technology as a design feature, and creative development is often the teamwork of different professionals these days,' said Mr Chan.

Mutual Fit's 10-member creative team in Hong Kong, for example, includes music engineers, radio frequency engineers, microcontroller programmers and a designer.

While there was a steady pool of different professionals working in this sector, Mr Chan said the demand for staff generally outstripped supply.

'This is not a large sector yet, but it is relatively stable. We basically know each other within the sector, and there are almost always some vacancies to be filled. We have a pretty stable team here, but when we need to recruit, we generally prefer people with some experience in their own professional discipline. Toy industry experience is not necessary because technological knowledge is quite transferable,' he said.

KEY PLAYERS

Graphic designer

Music engineer

Microcontroller programmer

Radio frequency engineer

Technological researcher

JARGON

Smart toys

Toys designed to help develop children's skills, creativity, logical thinking, personality and physical strength

MIDI (Musical Instrument Digital Interface)

A standard feature of musical toys for sending digitally encoded information about music

Web-compatible toys

Electronic toys that can download different games and educational material from assigned internet sources

EN71-Part 9

A major European toy safety standard that addresses the hazards of certain organic chemical compounds found in toys