It happens in London too, usually Middle Eastern older men - sometimes women. (In my experience, it's only for the under-threes, so it'll only be an issue for a short while.)
It is tricky when you're not expecting it. However, we decided to accept it was just part of a culture where children, respect for elders (that bit is relevant), and gifts are all important - so we taught the children to do extra special formally courteous thankyous, so that their reaction fitted in with the culture of the giver - if you see what I mean. (Refusing wouldn't have been polite at all, in context.)
Hope that helps?