BEIJING - TWO factories subcontracting to Hong Kong-listed toymaker Smart Union Group have shut their doors, the China Daily reported, calling it the first recent bankruptcies for an industry heavily dependent upon exports to the United States.

The two factories, in Dongguan, an export-dependent city about an hour-and-a-half north of Hong Kong by train, did not pay their 6,500 employees in September or October, the paper said in an online report late on Thursday. It cited local officials as saying the subcontractors had gone bankrupt.

Smart Union shares closed at HK$0.099 (S$0.019) a share on Wednesday, and did not trade on Thursday. They have lost 94 per cent of their value since the beginning of the year.

Smart Union has not yet given a reason for its share suspension.

The company reported a loss of more than HK$200 million in the first six months of the year.

Dongguan earlier this month set up a 1 billion yuan (US$216.5 million) rescue fund for small and medium-sized businesses hurt by the global economic crisis, which has reduced export orders sharply.

Factories in the southern Chinese province of Guangdong have also suffered from a credit crunch, rising labour costs and China's stronger currency, which makes their products more expensive.

The number of Chinese firms exporting toys overseas halved in the first seven months of 2008, compared to the year before, the General Administration of Customs said on Monday.