Frequent Recalls Challenge Chinese Rebouncing Toy Exports

Guangzhou Hotels

As the world's largest base for toy production and export, China's southern Guangdong Province is the barometer of the global toy industry.

There are signs suggesting local toy producers are recovering from the market "cold waves" at the beginning of the year, but higher technical and safety standards demanded by export markets for products may be working as trade protection.

Customs figures from Guangzhou, capital city of the province, show the province exported 2.56 billion U.S. dollars worth of toy products in the first seven months this year, though down 12.1 percent year on year, the decline rate was 2 percentage points lower than that in the first half.

Li Zhuoming, executive vice chairman of the Guangdong Toy Association (GDTA), said toy exports totaled 600 million U.S. dollars in July alone, a new high within the year after June's 400 million U.S. dollars.

"This suggests global demand for China-made Christmas toys is rapidly increasing," Li said.

But this is no surprise as the third quarter is usually the big season for the country's toy exports, said Liang Lin, board chairman of the Lung Cheong International Holdings Ltd., one of the largest toy producers in Guangdong.

Analysts say the government's policy adjustment is one major stimulus for toy exports. China has increased tax rebates from 13 percent to 15 percent for toy exports since June 1 this year, which reduced costs and spurred local toy companies to export.

Brand-building and technological innovation are further important reasons for the recovery of China's toy industry. Customs figures show products with self-owned independent brands have achieved better and accelerating growth than those without independent brands.

Guangdong's toy exports from self-owned brands expanded from January's 48 million U.S. dollars to 100 million U.S. dollars in July, up 41.4 percent compared with June.

Sunfun toys Industrial Co. Ltd., a local toy producer which sticks to self-branding, has maintained good sales this year. The company even did better than last year, said the company general manager Cai Junquan.

Lung Cheong International is also such an example. Their hi-tech robots are taking a big market share in Europe and the United States.

The exploration into the newly emerging markets has also helped China's toy industry. Figures show Guangdong's toy exports to the Association of Southeast Asian Nations (ASEAN) reached 130 million U.S. dollars in the first seven months, up 98.5 percent compared with the same period last year. While exports to the United States, the European Union, and Hong Kong markets were down 18.6 percent, 10.8 percent and 13.1 percent during the same period, respectively.

Some toy companies are looking at the domestic market, Liang Lin said. Because of weak demand from the U.S. and European markets, and the sensitivity to prices in the newly emerging markets like the ASEAN, his company is planning for more domestic sales.

"We could control the cost by reducing some functions of our products and sell them at a mid-level price affordable to domestic consumers. We believe this can increase our sales," said Liang.

But China's toy producers are facing more trade barriers. According to a rough calculation, in just the first week of September, toy makers had received five recall notices from countries such as the United States, Canada and Germany.

In one case, about 470, 000 toy products were covered in a recall announcement by three U.S. companies, for reasons of quality problems found in China-made toys, including sewing needles left in the stuffing, high-levels of lead contained in products, among others.

Though recalls targeted at China-made toys by the United States and Europe have been common in the past two years, the concentration of recalls recently is shocking.

Analysts say China's toy industry is rebounding in the backdrop of the global economic downturn, but increasing trade barriers are likely to bring a negative impact to this recovery.

A GDTA expert, who asked for anonymity, told Xinhua the ever-tightening technological and safety standards, and increasing test procedures have become the outstanding characteristic of many countries in the toy market.

A report by the Guangdong Entry-Exit Inspection and Quarantine Bureau shows China's major toy export markets, the United States and the European Union, are setting stricter regulations and standards for quality and safety of toy products. In July alone, the European Union made effective a new directive (2009/48/EC) relating to the safety of toys; the United States also adopted the Toy Safety Certification Program.

Li Zhuoming said this tide of inspection is spreading from Europe and the United States to the newly emerging markets. Malaysia, one of the largest Chinese toy importers among the ASEAN countries, announced it would implement a new toy standard from February next year, which requires tighter inspections.

This not only would raise costs for toy exporters, it is also feared this may cause chain reactions among other ASEAN countries.

Ever-rising technical standards in the international market are becoming a heavy financial burden for toy makers as testing fees rise.

Xue Xiaowei, plant manager of the local Guanlan Baode toy company, with an annual output of several hundred million yuan, said the company had to pay around 20 million yuan each year to third-party testing facilities.

Liang Zhongming, director and manager of Lung Cheong International, said differentiated toy standards among different countries increased the cost of toy testing for Chinese toy producers. He said the government should cooperate with foreign governments and institutions to avoid repeated tests and decrease the cost.