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."

Industrial Boom

China's industries continue to gain steam. In the first 11 months of 2010, state-owned enterprises and non-state enterprises with annual sales revenue of over 5 million yuan ($751,880) earned net profits of 3.88 trillion yuan ($583.5 billion), skyrocketing 49.4 percent from a year ago, compared with 51.6 percent during the January-to-October period, said the National Bureau of Statistics.

Their income from main businesses totaled 6.24 trillion yuan ($938.3 billion), an increase of 31.8 percent year on year.

Among the 39 industries being tracked, only the one sector experienced a decline in profits while all others said their profits were on the rise.

"China's industrial activities are regaining traction," said Hu Yuexiao, chief analyst at the Shanghai Securities Co. Ltd. "Since global commodities prices are creeping up, simmering costs inflation is likely to eat into profits of manufacturers in the fourth quarter. To relieve the cost pressure, manufacturers may have to raise prices of their downstream products."

Buying Spree

China, Asia's biggest regional retail market and the world's second largest economy after the United States, is expected to see a consumption boom over the next few years, with retail sales totaling $4.6 trillion by 2014, more than double that of 2010, said the international accounting firm PricewaterhouseCoopers (PwC) in a recent report.

Foreign firms are expected to undertake aggressive expansion in China, and as road infrastructure develops, this expansion will increasingly happen beyond the premier cities and developed second-tier cities and into third-tier cities, said Carrie Yu, China & Asia Pacific retail and consumer leader at PwC.

Many luxury goods companies that entered the Chinese market through joint ventures or franchises are buying back their distribution rights and setting their sights on expansion, she said.

Luxury sales in China accounted for $9.6 billion in 2009, or 27.5 percent of the global market, making it the world's second largest luxury goods market.

Chinese online retailers are also poised for massive growth. Taobao, the country's largest online retail marketplace, announced in August that it handled 97 percent more transactions in the first half of 2010 than a year earlier, with household goods accounting for the most transactions, said the report.