At a large wholesale market in the southern Chinese city of Shenzhen, Jin Ruihua sits surrounded by piles of unsold Santa hats and artificial Christmas wreathes as he waits for customers.

"Business isn't so good this year. There has been a severe impact from the global economic crisis," the bored-looking salesman for Dadi Red Lantern Crafts told AFP in his store crammed with colourful ornaments and styrofoam snowmen.

Christmas cheer is in short supply across China's manufacturing heartland of Guangdong province, where many companies are reporting fewer orders for decorations, toys and electronics from crisis-hit Europe and the United States.

The fall-off in demand has hit firms already reeling from rising costs, a stronger Chinese currency which makes their exports more expensive and labour unrest as workers in the vast region demand better pay and conditions.

Some manufacturers are exploring ways to make up for the Christmas shortfall by pushing into new overseas markets, focusing on high-end products and even shunning exports by turning to domestic consumers.

With Christmas orders typically placed by customers up to six months in advance, companies knew as early as the summer that this festive season would be bleak.

Christmas tree lightmaker Haocai Crafts said demand from the US and Europe had collapsed as consumers there cut back on holiday spending due to the increasingly dismal economic outlook.

The company recorded only 10 million yuan ($1.6 million) worth of orders for the festive season, down two-thirds from previous years.

"What measures can we take? We can just produce for when there are orders," salesman Liao Maofang said.

China's export growth has slowed sharply this year, rising 22 percent to $1.55 trillion for the first 10 months, compared with a blistering 31 percent for all of 2010 -- and analysts and officials expect the situation to worsen.

Vice Premier Wang Qishan, China's top finance official, last month issued a dire warning that the global recession was here to stay and would impact the export-dependent economy due to weakening external demand.

Royal Bank of Scotland economist Li Cui said Europe, which accounts for about 25 percent of China's exports, had been "a drag" on the manufacturing sector and she expected demand would remain weak next year.

In a sign that global turmoil is already hurting China, the nation's manufacturing activity contracted for the first time in 33 months in November, causing concern that the Asian powerhouse is losing steam.

"It's been very hard to export to the United States and Europe," said Wang Zhaojun, a manager at the Jingxin Crafts Factory, a maker of artificial Christmas trees.

"The prices are very low, while domestic labour costs are so high now."

Earlier this year, Guangdong hiked the minimum monthly wage by an average 18.6 percent to between 850 yuan and 1,300 yuan, but persistently high inflation and demand for skilled workers has prompted employees to demand even higher salaries, manufacturers said.

Some companies have responded to the downturn by turning their focus to the Chinese market, where economic growth has remained above nine percent despite the turmoil overseas.

This matches the government's oft-stated aim of shifting the world's second-largest economy away from exports in favour of greater domestic consumption as the main engine of economic growth.

Stuffed toy maker Yuankang no longer depends on overseas orders for its revenue, especially for the Christmas holiday.

"We didn't receive many Christmas orders this year. But we do not produce much for the overseas market now," said manager Li Xiaomin. "Our focus is the domestic market."