Recently reported in The Guangzhou Daily, China is calling this Christmas “the worst” for Chinese toymakers ever. Guangdong province, where 60% of China’s exported toys are made, are feeling the sting from plummeted orders from the US, down 25% from last year. China’s toy manufacturers say soaring cost of raw materials and strict American laws are to blame. But Chinese government officials blame a stronger Chinese currency and the high cost of complying with stringent safety standards imposed by the U.S. and EU for compounding the problems and forcing them out of business.
More than 80% of the toys sold around the world come from China, but with U.S. safety laws putting more pressure on the Chinese government to upgrade and improve their toy manufacturing, China is struggling to stay afloat.
Some of this is partially due to the Yuan which gained another 2.5% this year. But adding to China’s troubles are regulations passed by Congress after several recalls of China-made toys containing excessive levels of lead paint. The law requires toy manufacturers and suppliers to reduce the amount of lead contained in the surface coatings of children’s toys in three phases and test and certify their products in independent, accredited laboratories.
Although they view it as the U.S. “overreacting”, the Chinese government has been responsive to the new U.S. safety requirements. However, pressure in the U.S. to create more jobs in America is also a barrier for Chinese manufacturers. In a recent interview with China National Radio, Fang Ziang, deputy director of China’s Standardization Administration said, “Each time after we upgrade and improve our safety standards and meet their requirements, the U.S. and EU raise the bar again. The cost keeps going up and seriously harms China’s toy export business. I don’t think these trade barriers will save any American jobs. Instead, they’ll hurt American consumers.”
Rising manufacturing prices in China will eventually pinch the profits of U.S. retailers and toy companies. As a consequence, U.S. brands that are sourcing from manufacturers in China will have to reduce their own margins in order to maintain production or find other sources to manufacture their toys.
According to the Toy Industry Association, the average price of toys has remained relatively steady over the past few years, at around $8 but few believe this will last. Whether the new regulations are necessary safeguards to protect children or an overreaction, American consumers will eventually have to bear the cost.