Staff workers sew mascots at a factory of of Yancheng Rainbow Arts and Crafts Co. [Photo/China Daily]

The wage surge is not unique to Yancheng. In fact, labor costs shot up 20 percent each year for the past four years, and China's coastal provinces are losing their power to find workers, according to a recent report in The Economist.

"We can see the trend that more and more manufacturing is moving to other countries and regions - more and more textiles industry to Bangladesh, Sri Lanka, Thailand - where the cost of manufacture is much lower, whereas electronic products move to Taiwan and Malaysia," said Graeme Read, group managing director of Antal International, a global executive recruitment organization.

But Read also said that in comparison with other countries in the region, China still retains a manufacturing advantage in terms of better logistics and an abundant labor force with engineering diplomas, and China manufacturing is moving up the value chain.

Gu said some toy plants in Yancheng moved to central China, and some moved to other countries.

He added his business setup in Jiangsu has both advantages and disadvantages.

"Because the industrial chain is complete here, from a button on the toy to the packing case, you do not have to waste time buying the smallest parts."

"But I know I will have to move sometime anyway. It is the trend."

Gu said he has considered moving to other industries, but that takes time.

"For example, I tried to invest in photovoltaic material, but ended up losing money. Now I wish I had chosen real estate instead of toys when I started my own business 15 years ago."

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