Hong Kong and mainland toymakers are in for a tough year with rising costs, product safety concerns and slowing global economies, according to industry leaders. But they should still maintain the modest export growth rates achieved last year, given concerted efforts by toymakers to improve the reputation of mainland-made products. Toys Manufacturers' Association of Hong Kong executive vice-president Yeung Chi-kong forecast shipments would increase about 3 per cent, matching that of last year when about HK$160 billion worth of Chinese-made toys were sold to countries including the United States and Europe. Despite his 'cautious optimism' about the industry's outlook, some of Hong Kong's 4,000 toy companies with factories across the border are bracing for a forecast 15 per cent jump in costs as a rising oil price, an accelerating yuan as well as higher raw material cost and wages continue to bite. The cost woes have been compounded by a new labour contract law and an increase in corporate income rates, which could force 'hundreds of smaller players' to go bust, according to Hong Kong Toy Council chairman Lawrence Chan. 'Before Christmas we were pessimistic about sales for the US market,' Mr Chan said yesterday. 'However, US toy sales ended last year with almost 3 per cent growth, which was good news indeed.' Mr Yeung said despite the difficulties facing the industry, he was confident that toy exports would eke out growth this year. About 86 per cent of toys in the US come from the mainland and Hongkongers account for the bulk of the country's toy factory owners. Mr Chan said this year's growth was likely to be driven by increases in factory-gate prices as many manufacturers were expected to pass on part of higher production costs. Some were expected to raise their productivity and efficiency to offset rising costs. 'However, there is uncertainty about volume growth, which depends partly on shoppers' appetite and the impact of the US subprime lending crisis,' Mr Chan said. A tidal wave of product recalls hit Hong Kong toymakers on the mainland last year, with economists suggesting they were victims of a Sino-US trade dispute rooted ultimately in the mainland's record trade surplus and a slower than expected rise in the yuan. To restore merchandisers' and consumers' confidence, a four-day toy festival will be held for the first time in Hong Kong next week in conjunction with the Hong Kong Toys and Games Fair, the world's second-largest fair of its kind after that of Nuremberg in Germany. 'We want to tell global consumers that Chinese-made toys are safe and its safety standards are improving,' Mr Chan said.