Whisper it quietly but Father Christmas looks as though he will be underemployed this year, with exports of Chinese toys and gifts to Europe down by 20%, reports CNS.
That news alone should be enough to send European children into a major sulk. And they will be joined in their sullen mood by more than a few Chinese factory bosses, with the wider data supporting the depressed mood.
In November, the Purchasing Managers’ Index fell to 49 points – a score below 50 indicates a contraction in manufacturing. The index is released by the China Federation of Logistics and Purchasing, and November’s result was the first negative score to be published since March 2009, reports CapitalVue.
Factory owner Miss Lin highlights the problems now facing exporters. This year, she found that foreign buyers were less likely to make big orders. A Belgian company that would usually order 50,000 custom-made Christmas trees, only ordered 20,000, for instance. But the client insisted on paying the same price as last year on a unit basis, despite higher production costs for Lin.
“I still have to take the order,” she told CNS. “This is how the market is and if I don’t take it, others will.”
Falling demand isn’t the only factor being blamed for dwindling margins by factory bosses, who also face upgraded EU safety directives for imports, designed to prevent the use of harmful substances in toy design.
In addition to increased costs-to-produce, manufacturers need to spend more on testing product safety, as well as sourcing compliant raw materials.
“Under the new directives, production costs will rise by 15%,” Li Ding, general manager of Jiangsu Yangzhou Toy Company, told International Business Daily.
“If they increase the technology threshold further, small plants like ours will barely be able to cope.”
Most of China’s foreign toy manufacturers perform OEM work for foreign clients. International toy companies probably welcome the new directive as it will help ensure dangerous practices don’t lead to reputational damage.
A few years ago, Mattel recalled millions of ‘Made in China’ toys that were discovered to contain high levels of lead. The world’s largest toy maker spent tens of millions of dollars to settle a lawsuit, reports the Wall Street Journal. A number of high profile product recalls in 2007 led to stricter standards in the US relating to toy safety.
Not everyone has a tale of doom-and-gloom. Despite the struggle for toymakers, producers of Christmas ornaments have been reporting a jollier time – in part due to a focus on the domestic market.
The manufacturing city of Yiwu claims to be the world capital for Christmas decorations, and it is having its best ever year, reports the Financial Times, with orders for export up by a healthy 10%.
But the real growth is coming from sales at home in China, where younger people are now much more inclined to celebrate Christmas as a holiday. This does require the occasional rethink in product design terms, however, such as a tree that can be decorated with tinsel and baubles before being reused a month or so later with decoration from more traditional ornaments for Chinese New Year.
Growing demand at home is not the only factor in making sales in China more attractive to sellers of Christmas wares.
“The domestic market is more profitable,” Gong Yuequan, chairman of Zhejiang Youlide Arts and Crafts Company told the Financial Times. “Foreigners know how much these things should cost but domestic customers have just started celebrating Christmas and they have no idea,” he said.
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