Mattel expects to grow three to four times in the more than $31 billion toys and games market in China by 2020 through digitally connected toys, as it intensifies its efforts to take on LEGO Group and Hasbro Inc in the country.

Mattel — which cut its dividend by more than half to fund the new efforts — said its emphasis on e-commerce and repackaging its core brands as educational toys and connecting them to the internet would propel its position in the fragmented market.

The toymaker has about 2 percent market share in China, lagging behind construction toy maker LEGO which has 2.8 percent control over the market. Hasbro is catching up with 1 percent, according to Euromonitor International.

Mattel has been revamping its toys, developing AI Barbie Holograms, smart sensors-enabled Hot Wheels cars and virtual reality powered View-Masters to make them relevant to millennial parents.

The new, digitally connected toys will be launched globally…