"These days 80 percent of our products are high-grade, which pushes the unit price of sweaters from US $3 to US $5," Zeng Tianren said, adding that 90 percent of the functions of the new machines are beyond the scope of the old hand-operated machines, and that they are ten times more efficient in producing quality goods.

Zeng explained that Yingqi makes a higher profit when its clients choose a design from the company catalogue rather than giving him a sample to follow. This is why his company now has 40-50 designers, some of whom are from Hong Kong.

That independent designs increase profit margins is an opinion shared by Lan Jiezhou of the Longchang Toy Factory, who said that only five percent of his orders had been affected by the financial crisis. Longchang sets great store by independent design. The company owns more than 300 toy patents, has a 300-member R & D team and invests RMB 30 million each year in product R & D.

Lan Jiezhou proudly displayed the robot designed by one of the company's designers. It is 16.5 cm tall, weighs 350 grams, and sells for HK $2,000 apiece. The toy will go into full production soon.

Lan Jiezhou, 32, from Sichuan Province, has a different background from others of his age working on production lines. He used to work at a foreign trade website called "global resources." Soon after coming to Dongguan he had his own 10-square-meter private office in this Hong Kong-funded company.

Lan is fully conversant with the development of Guangdong's toy industry. "The progression from OEM (Original Equipment Manufacturer) to ODM (Original Design Manufacturer) to OBM (Original Brand Manufacturer) epitomizes Guangdong's toy industry, and the three steps of Longchang's successful transition," Lan Jiezhou said.

"OEM does not require large investment, but profit margins are small (5-8 percent in gross profit). ODM and OBM are basically the same. Owning original designs gives us the capability to choose clients and negotiate with them, and hence a sharper competitive edge. We now have a profit margin of between 10 percent and 25 percent, sometimes higher."

OEM, ODM and OBM co-exist within Longchang's present structure, but OEM makes up at least 65 percent of production. Lan Jiezhou's company plans to increase its ODM and OBM proportion to 50 percent within the next five years.