Although Chinese exporters saw an increase of Christmas orders, their profit woes still linger.

Guangdong Province reported $770 million of yuletide product exports from January to October 2010, a modest increase of 3.9 percent from the previous year, said Guangzhou Customs.

In Yiwu, a petty commodity hub of east costal Zhejiang Province, the Christmas exports soared more than 30 percent in 2010 from 2009 as the world economy regains strength, said Chen Jinlin, General Secretary of the Yiwu Christmas Goods Industry Association. Yiwu supplies around half of the world's Christmas products ranging from handcrafted ornaments to dolls.

"Despite a run-up in festive orders, we are struggling to make ends meet," said Li Genjun, Deputy General Manager of Yiwu Hangtian Arts & Crafts Co. Ltd. "The biggest concern is labor costs that have climbed at least 30 percent from a year ago."

As most Christmas products are assembled by hand, the industry is extremely reliant on human resources, and a shift toward mechanized operations would be economically unfeasible for most, said Chen.

Rubbing salt into wounds of the exporters was the appreciation of the yuan. "If the exchange rate further appreciates, I may not accept any orders at all," said Chen Shaoyan, owner of Zheng Chang Long Arts & Crafts Factory in Shantou, Guangdong Province.

With the dim outlook on everyone's mind, exporters are scratching their heads as to how to attract customers.

"We spend at least 1 million yuan ($150,376) on development of new designs every year, accounting for 5 percent of our annual expense," said Chen. "But the benefit has not been felt as handicrafts are easily copied."