China's toy exporters face grim reality

GUANGZHOU - The upcoming Spring Festival may not ease the pain for toy exporters in China's southern coastal areas who have felt the pinch due to rising costs, yuan appreciation and tougher regulations from western importers.

China is the world's largest producer and exporter of toys, with Guangdong alone contributing over 70 percent of the overall output.

Zhongshan is the province's leading export hub with 118 companies. Its exports account for over one tenth of the province's total.

However, the boom has cooled down.

The trade hub of Zhongshan has seen a two-consecutive-year drop in toy exports worth $64.2 million, down 6.6 percent year on year. Volume shrank by 2.7 percent to 48,514 batches, said Xie Lin, official with Zhongshan Entry-Exit Inspection and Quarantine Bureau.

The minimum wage in Zhongshan climbed to 1,100 yuan in 2011 from 920 yuan the year before. The increase in wages has led to rising production costs by at least 10 percent for most companies, according to industry insider Chen Mei.

Extra costs cannot simply be passed onto customers as clients from the United States and Europe expect cheap prices when buying from China. Only a few customers will accept a 2 percent price rise when costs increase by over 5 percent.

Manufacturers said they have to keep accepting orders even when there is barely any profit because they cannot afford to lose customers and workers.

Large quality recalls by international toy giants have also hurt the industry as western customers raised standards to ensure safe toy imports.

Exports to European countries and the United States take up a lion share for the city of Zhongshan. The worth of exports to the US reached $206.35 in 2012. This accounted for one third of its overall export trade, according to official statistics.