BEIJING, Oct 12 (Reuters) - Chinese toy makers must be more cautious signing contracts with foreign firms to avoid product safety problems, but must also boost their game and start designing themselves, a state-run newspaper said on Friday.

The quality of Chinese goods has come under international scrutiny following scandals involving everything from toothpaste and pet food to toys and fish.

In one the largest incidents, the world's biggest toy maker, Mattel Inc <MAT.N>, recalled about 21 million of its Chinese-made toys in a span of five weeks, many because of excessive levels of lead paint.

A senior Mattel executive later apologised to China for the trouble the recall had caused.

The International Business Daily, run by China's Commerce Ministry, said in a front-page story that though the reputation of "made in China" had been restored of late, the toy sector in particular was not yet out of the woods.

"We must squarely face the problems which exist in the development of our toy industry, the first of which is that there are still hidden dangers for toy quality and safety," the newspaper said.

But a major issue was also that the industry had a lack of "sense of self protection", it added.

Companies should sign proper contracts, not commit themselves to unrealistic production targets and "be cautious about accepting orders", the report said.

"When signing contracts, clearly state responsibility for quality, pay attention and be on guard to operating risk," it added.

"There are many cases where producers and sales companies do not sign formal contracts. Once there is a quality or safety dispute, it's hard to work out where the management responsibility lies."

Reducing reliance on simply making toys for other brands and creating a unique product of their own were other suggestions.

"Establish brand consciousness, strive to create your own name and develop high quality goods," the paper said.

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