The costs associated with complying to stricter overseas and domestic regulations is pushing many small to medium baby toy manufacturers to switch product lines or close down, according to Global Sources’ China Sourcing Report: Baby Toys.

The survey found that 41 per cent of suppliers believed stricter overseas standards would be a big challenge over the next year. 23 per cent identified price competition as their biggest challenge while 18 per cent indicated higher raw material costs.

Other challenges indicated were design copying, piracy and labour shortages.

"Due to these higher costs, we expect consolidation in the industry with a number of small to medium manufacturers switching to other product lines or shutting down permanently,” Spenser Au, the report’s publisher said.

"Due to higher operating costs, including raw material and labour costs, most manufacturers said they plan to raise prices in 2008,” Au also said.

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Accordingly, 82 per cent of manufacturers surveyed plan to increase prices, with almost 60 per cent of respondents saying they’ll limit the price increases by up to five per cent.