With music in the air, festive lights brightening the spirit and Santas smiling beside Christmas trees, few people would bother about work today, except perhaps businessmen in Zhejiang Yiwu.

That's not unusual, for Yiwu is one of the world's largest manufacturing hubs of light goods.

That's perhaps where the contradictions end for Yiwu, which is just three hours drive south of Shanghai. Like most other cities across the world, Yiwu has seen an increase in the sale of Christmas-related goods this year.

But manufacturers in the city are still not happy. They complain the market is getting too competitive, and fear prices would rise further next year, which is common across the globe.

The rising costs of raw material and labor have cut down their profit margins, the manufacturers say. In fact, most of them claim profits have shrunk to about 10 percent.

Some even complain they don't make a profit any more. "I'm actually losing money," says Yu Yujun, who makes Christmas trees.

Prices for material used to make Christmas-related products, such as plastic sheets and iron, have risen rapidly this year. For instance, the price of iron wire has risen from 4,800 yuan (US$620) to nearly 6,000 yuan (US$810) a ton. This has put great pressure, Yu says, because it makes up nearly 40 percent of the cost of a Christmas tree.

The cost of labor is rising, too. A worker making Christmas trees now has to be paid 1,500-1,800 yuan (US$203-244) a month, almost 10 percent more than last year, says Yiwu Festival Gifts Co sales manager Lang Yu. The company is one of the largest local manufacturers, which employs about 500 workers during the busy season and expects its sales to reach $10 million this year.

To add to their woes, the falling dollar has forced people in the US - China's major export market - to cut their consumption.

But there's a silver lining in the dark clouds above Yiwu manufacturers' heads: other developed markets are going strong and demand from emerging markets is rising.

Lang's company, for instance, has received more orders from South America this year. And Yu says Yiwu manufacturers exported more than 80 percent of its products to Europe, while earlier the US used to import more than 40 percent of the goods.

A more exciting market has been created back home. Chinese consumers, especially the middle class, have started celebrating Christmas in earnest. Fancy Christmas trees have become a must in most shopping malls, hotels and bars in cities such as Beijing.

Asked about the likely trend next year, many Yiwu manufacturers say they are in talks with some potential customers in Chinese cities.

To cash in on the domestic market, "we expect to raise the price by 10 percent next year, too", says Lang. And he will not be alone to do so.

Christmas, after all, is not a bad time to talk business.

(China Daily December 25, 2007)