After a year-long roller-coaster ride, Hong Kong manufacturers with factories on the mainland are hoping for stability in the year ahead but are not likely to get it. 'Problems buffeting Hong Kong factory owners in the past year are unlikely to abate in 2010,' says Danny Lau Tat-pong, the chairman of Hong Kong Small and Medium Enterprises Association. 'I don't think the export sector will return to the pre-global financial crisis level until 2011.' Lau, an owner of a paint and coating factory in Dongguan, fears that the ghost of yuan appreciation will return this year to haunt manufacturers who are still recuperating from a year of weak orders, eroded profit margins and punishing competition. The threat of a higher yuan is compounded by other challenges such as cautious buyers in the United States and Europe, a slow recovery in consumer demand, rising commodities prices and labour costs and intensifying competition from mainland players. The fortunes of the manufacturers appeared to have rebounded in the final quarter of 2009 as many small last-minute orders flowed in from overseas buyers demanding immediate shipment at all costs. Many large toy orders were delivered by air to the United States shortly before Christmas. 'This creates the false impression of a rebound in exports,' says Lau. 'The reality is that those orders should have been placed in the first half of 2009, and importers prefer reordering after clearing stock.' Despite repeated assurances by Premier Wen Jiabao to maintain a stable yuan, Lau worries that the currency's value will be dictated by international pressure and politics. 'We hope the yuan won't appreciate too much,' says Lau, who estimates that every 1 per cent rise in the yuan's exchange rate against the US dollar will shave the same percentage off a company's profits. 'The line between politics and economics is blurred and it is hard to separate them especially on the yuan issue.' The yuan has hovered around 6.82 against the US dollar since the beginning of 2009 after gaining 7.1 per cent in 2008. '2010 will be a year of survival of the fittest,' says Lau.