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A woman works on a stuffed Zabivaka, the mascot of the 2018 FIFA World Cup, at a workshop in Dongguan, China. The local toy industry has struggled in recent years.   © Reuters
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China's toy making capital scrambles to reinvent itself

Dongguan was at the forefront of 'reform and opening up.' Now its big bet is on tech

DONGGUAN, China/HONG KONG -- At its peak, the city of Dongguan in southern China produced half of the world's toys, including one in three Barbie dolls.

Then rising costs and fierce competition from manufacturers in Southeast Asia began to bite, and thousands of factories were forced out of business as profits shrank. China's ongoing trade war with the U.S., a key market for toymakers, has only made things worse.

One of the more recent closures was Wei Cheng Industrial, which for 15 years churned out stuffed animals and dolls for toy shops in North America, Eastern Europe and Latin America. The business collapsed over the summer, leaving the factory buildings empty and bougainvillea growing untended by the gates. Locals say that near the end, the company was having trouble paying its workers.

More traditional industries are facing pressure, too. The nearby town of Dalang, which is controlled by the Dongguan government, is famous for its many textile mills.

But Wang Haotian, a salesman at a local knitwear company, said many of those factories have been forced out of business by the recent crackdown on polluting industries -- smaller players cannot afford the extra costs of complying with Beijing's rigid environmental standards. The loss of American customers due to the trade war also dealt a heavy blow. "Business has been very slow lately," said Wang.

Forty years ago, Dongguan was at the forefront of China's economic reform. Now the city is having to reinvent itself once more as the economy -- and government priorities -- shift.

Didi Chuxing, the ride-hailing startup valued at $56 billion, is one of the symbols of China's new economy. It has also become a lifeline for many in Dongguan.

Lin Weidong has a day job at a trading company inspecting stainless steel products. But where he was once kept busy running from factory to factory inspecting knives and forks and other items bound for Western markets, this year he has spent most of his time in his office playing mobile games.

"I don't have much work to do," Lin said, adding that the company's export business with U.S. companies has been badly affected by the 25% tariff that the U.S. has imposed on steel imports. On a typical day, Lin leaves the office at 5 p.m. sharp and spends the night as a Didi driver.

Dongguan was more vibrant several years ago thanks to the huge influx of migrant workers, Lin recalled. "Dongguan is like a dead city now," he said.

The local government is betting on China's tech revolution to change that.

Promoting itself as a key part of a "Silicon Valley-style Chinese tech corridor," the Dongguan municipal government is providing hefty incentives to persuade startups to set up shop in the city's old industrial zone of Mulun.

Abandoned factory buildings there have been transformed into trendy, colorful spaces, while banners attached to old factory fences proclaim, "International Innovation Port." Startup incubators, innovation centers and coworking space operator UCommune are among Mulun's newest tenants.

The tech scene is even further along in Dongguan's Songshan Lake area. This summer, smartphone maker Huawei Technologies began relocating thousands of its research and development staff to a new campus there. The garden-style complex, with office towers resembling European castles, spans 1.27 sq. km and has its own rail system.

Situated about 40 km from the tech powerhouse of Shenzhen, the area is positioned to be a hub for advanced machinery, robotics, new materials, biotech and information technology, all priorities in Beijing's Made in China 2025 initiative -- and targets in the technology "cold war" between the U.S. and China.

Dongguan benefited hugely from the economic policies of the reform and opening up era. Forty years later, its ability to reinvent itself is once again being put to the test.

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