The US still lacks strength, the European Union remains on the verge of economic recession and economic growth has generally slowed in all developing countries, the key markets for China's top exporters.

Oasis Ocean Toys has now started selling its previously export-targeted products in the Chinese market, Yang said, so the company at least managed to see some growth last year, although not by a significant amount.

This trend of exploring the Chinese market has also started to have a strong influence in Dongguan, a city once known as the "world's factory" in Guangdong province which has always been seen as a key top manufacturing city, according to David Zhang, a research analyst specializing in the toy market with Euromonitor.

 

"The lousy performance of the overseas market has at least helped to boost the Chinese market by introducing more competition," said Zhang.

"Toy manufacturing has become quite scattered, but the difficulties in the overseas market have meant that stronger companies have been able to consolidate their position, while weaker, less competitive ones have quit," he added.

The leading players in the Chinese market also represent some of the biggest names in the global market.

In October, Guangdong Alpha Animation and Culture Co signed an investment agreement with US entertainment giant Hasbro Inc to establish a joint venture for the development and design of animation toys.

The JV will attract a total of $15 million from both sides and will distribute products and manage the use of brands globally.

The Nasdaq-listed Hasbro is a branded play company providing a wide-range of entertainment offerings based on the company's global brand leaders such as Transformers, My Little Pony, and Monopoly, among others.

Although generally welcomed, the Hasbro deal has signaled the other the big challenge facing Chinese toy makers - that world-renowned companies are keen to get their own slice of the China market.