Hong Kong-owned Chong Yik Toy Company has shut down its factory in Shenzhen, the South China Morning Post reported, citing sources as local officials who had paid the workers from emergency funds.
Qiu Weiquan, a district labour official, told the Post: "The workers got payments ranging from a few hundred yuan to nearly 8,000." He added the local government had paid a total of 3.4 million yuan ($498,000) in compensation.
One worker told the paper that he was owed four months' salary. He said: "I have been so worried about that for a long time. I'm so lucky to have the payout.”
The factory’s closure comes just days after Hong Kong-listed Smart Union closed its factory doors in Dongguan and went into liquidation leaving up to 7,000 people jobless.
Southern China has enjoyed an export-driven boom in recent years supplying the world's cheap toys, gadgets and clothes. However, a combination of rising labour costs, expensive raw materials and the appreciation of the Chinese currency, coupled with the recent downturn in demand from the US have all put the area's factories under pressure.
A total of 3,631 mainly small enterprises that made toys for export, or 52.7 per cent of all such companies, had gone out of business in the first seven months of the year, Xinhua news agency reported.