Mr. Hu Yaoming, a veteran in the toy importing business in Los Angeles, told Sing Tao News that imports from China are rapidly shrinking due to difficult market conditions. He also noted that cultural differences can be a market-entry barrier.

Chinese toys still make up 80 percent of the toys being sold in the U.S. But American consumers are buying less in general, pressured by the economic downtown. Some customers are discouraged from purchasing made-in-China toys because of the lead paint scandals last summer.

Importers like Hu are also trying to hold smaller inventories, because new regulations on lead and phthalates will come into effect Feb. 14, 2009, and Aug. 14, 2009. "Today's qualified products will become illegal tomorrow," he said.

Hu pointed out that American consumers have different tastes than their Chinese counterparts. Toy weapons, for instance, sell very well in China but can turn off American parents.

On the flip side, he noted that there's great market potential for electronic toys from China. Lower cost countries like Vietnam can offer cheaper stuffed animals than China, but China has unique advantages on electronic toys, thanks to the strong electronics sector in China.