By James Pomfret

GUANYAO, China, Aug 3 (Reuters) - Thousands of young Chinese toymakers dressed in pink and blue Mattel T-shirts spill from the U.S. toy goliath's factories in Guanyao after an 11-hour overnight shift, as the dawn shift took their place.

Street hawkers on motorbikes sell warm soy milk, steaming buns and noodles to the throng wanting a quick snack before heading back to their crowded dormitories.

"I'm so exhausted I could die," said a 19-year-old worker from Hunan who had spent the night attaching hair to "3,000 (Barbie) dolls" in her factory. Her six-day working week earns her around 1,000 yuan ($132) a month, far more than she would earn at home.

Mattel Inc. <MAT.N> is recalling 1.5 million Chinese-made toys worldwide because their paint may contain too much lead -- the latest in a deluge of product safety scares that have tainted the "made in China" brand.

The toys, made for Mattel's Fisher-Price unit and including popular characters like Elmo and Big Bird, were produced by a contract manufacturer in China using a non-approved paint pigment containing lead, Mattel said on Wednesday.

Many of the Chinese workers at the Mattel plant in Guanyao, one of about 50 Mattel plants in the country, seemed unaware of the scandal.

"I've not heard anything about lead paints," said a spray-paint worker at another massive Mattel factory with a fluttering American flag by its gate on the other side of town.

"The paint we use is certainly safe."

Workers said production at Mattel's DieCast China plant in Guanyao -- a dusty factory-town an hour's drive south of Guangzhou, capital of booming Guangdong province -- was going on as usual, with toys being moulded, assembled and cranked out in the tens of thousands 24 hours a day, seven days a week.

Dawn Li, a human resources manager at the factory, said no managers were available to comment on the recall before referring all inquiries back to U.S. headquarters.

"LOT OF THIS GOING ON"

There's been growing concern worldwide about the safety of China's exports from tyres to tainted food, drugs and toothpaste.

Mattel's woes come despite being widely regarded as an industry leader in product safety and quality control. It carries out independent audits of its own factories and those run by contractors -- carrying out inspections and imposing stringent standards.

Mattel's troubles underscore the complexities and pitfalls of supply chain management in China, namely the Pearl River Delta where most of its toys are made.

"There's a lot of this going on," said Ken Chan, a manager at the Heng Jia Plastic Mould Company in Guanyao, of the manufacturing business in China in general.

"It's very difficult to have perfect quality control," added Chan, who's worked in the region's factories for more than 20 years.

Even with regular inspections, breaches in the production chain were always a possibility.

"For example, a boss pays $10,000 for a tonne of plastic materials and his employee goes and pays $8,000 for something else. The $2,000 is eaten up and you end up with a cheaper material that has toxic substances in it."

Mattel's case is not an isolated one. In June, RC2 Corp. <RCRC.O> had to recall 1.5 million wooden Thomas & Friends toy trains because some of them contained lead paint.

Stretching from Hong Kong up to Guangzhou, the Pearl River Delta has over the course of the past 25 or so years burgeoned into one of the world's biggest manufacturing areas, saturated with hundreds of thousands of factories churning out products for the world's luxury brands to those of lower quality.

The nine major cities comprising the Pearl River Delta are now collectively the world's top manufacturer and exporter of toys, watches, telephones, radios, footwear and clothing, according to Hong Kong's Trade Development Council.

Mattel's factories are generally considered to have superior living and working conditions -- including medical and leisure facilities and nutritionists helping formulate healthier canteen food.

"I would say its factories are better than the others here (in Guanyao)," said a man surnamed Sun from Guizhou who arrived for work on his own red motorcycle.

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