"When I rushed there around 5 p.m., police had already sealed off the area," a senior official of the firm said. "I saw that our boss had two deep marks in his neck."
Lee Der was under pressure in a global controversy over the safety of Chinese made products. It is common for disgraced officials to commit suicide in China.
This month, Mattel Inc., one of the largest U.S. toy companies, was forced to recall 967,000 plastic preschool toys made by Lee Der because they were decorated with paint found to have excessive amounts of lead.
Days later, Chinese officials temporarily banned Lee Der from exporting products. The recall cost the company $30 million, it is reported.
The recall was among the largest in recent months involving Chinese products, which have come under scrutiny worldwide for containing potentially dangerous high levels of chemicals and toxins.
Chinese officials, eager to protect an export industry crucial to China's booming economy, have aggressively tried to shore up international consumer confidence by cracking down on makers of shoddy goods, crafting new regulations and stepping up inspections.
In one of the more bizarre cases, a court in Beijing on Sunday sentenced a reporter to one year in jail after he pleaded guilty to faking a television report that showed migrant workers making meat buns stuffed with cardboard for sale.
The report, concocted by freelance reporter Zi Beijia, fanned fears in China and abroad about China's poor food safety record. The report appeared on national television and was widely seen on the Web site YouTube.
In the Lee Der suicide, an official who answered the telephone at the company's factory in the southern city of Foshan on Monday said he had not heard of the news.
Cheung was a co-owner of Lee Der, according to a registry of Hong Kong companies. The other owner, Chiu Kwei-tsun, did not return telephone messages left for him.
In its report, the Southern Metropolis Daily said Cheung, a Hong Kong resident in his 50s, treated his 5,000-odd employees well and always paid them on time. The morning of his suicide, he greeted workers and chatted with some of them, the report said.
After the recall, Lee Der maintained that its paint supplier, Cheung's best friend, supplied "fake paint" used in the toys, the Southern Metropolis Daily said.
"The boss and the company were harmed by the paint supplier, the closest friend of our boss," Liu, the manager, was quoted as saying.
Mattel Inc., based in El Segundo, California, issued a statement Monday expressing sorrow over Cheung's death.
"We were troubled to hear about this tragic news," the statement said. "This is a personal misfortune not a corporate event. Any loss of life is a tragedy and we feel for the family during this difficult time."
Separately, Mattel was preparing to announce the recall of another Chinese-made toy as early as Tuesday because it may also contain excessive amounts of lead paint.
In announcing the temporary export ban against Lee Der, a government quality inspection agency also slapped a similar prohibition on Hansheng Wood Products Factory and said police were investigating both companies' use of "fake plastic pigment." Such pigments are a type of industrial latex used to make surfaces smoother and shinier.
Hansheng made wooden railroad toys that a New York company, RC2 Corp., sold under the Thomas & Friends Wooden Railway product line. RC2 had to recall 1.5 million of the toys earlier this year because of lead paint, which can cause vomiting, anemia and even neurological damage.
Chinese companies often have long supply chains, making it difficult to trace the exact origin of components, chemicals and food additives.