Problems with labor and materials are pushing Chinese producers of festive goods to the brink. Gao Qihui reports from Shantou.

Christmas is "the most wonderful time of the year", sings crooner Andy Williams in his 1963 hit. Many Chinese manufacturers used to agree - not any more.

After a year of coping with labor shortages, price hikes for raw materials and an appreciation of the renminbi, many companies that make yuletide products are now considering pulling out of the industry.

Almost 60 percent of the world's Christmas products come from China. Yet, while toymakers record healthy profits, factories producing decorations and ornaments say they are struggling.

"If the situation does not improve, we'll definitely want to quit (production)," said Cai Qichang, owner of an arts and crafts company in Shantou, Guangdong province. "The sun is setting on the Christmas product industry (in China) right now."

Exports of festive products from the province actually hit $770 million between January and October 2010, a 3.9-percent year-on-year rise, according to official data.

However, the increase has failed to ensure a merry Christmas for producers.