July 1st, 2007. A 10th anniversary of China’s resuming exercise of sovereignty over Hong Kong. During the flashing by decade, Hong Kong has gone over various difficulties and achieved sustained economic development, which is obvious to the world.
Hong Kong’s toy industry and economy progress at the same pace. Meanwhile, Hong Kong and Guangdong also forward side by side for the toy business, which are closely related and mutually dependent. Our review and expectation on the course of toys commemorate the 10th anniversary festivities. We anticipate further refulgence of toys from the both sides. Therefore, TOY INDUSTRY delivers the special feature—Hong Kong’s Decade, in which people of high prestige in toy industry make their comment.
After gusty rain, we eventually see splendid rainbow. Our joint effort will bring in brighter future for the business.
China produces most of the toys in the world, while Guangdong’s products account for the largest amount of national export. It can be said that, Guangdong is worthy of her name of production base of global toys. All along, toy business has always been the strongpoint for Hong Kong’s industry. With abundant categories and creative design, Hong Kong’s toy industry comes out top in global market. To reduce production cost and cerement competitive edge, from the beginning of 1980s makers of Hong Kong have gradually moved most of their production lines to mainland, especially PRD (PRD). With the passing years, Hong Kong and Guangdong have made brilliant cooperative achievement. Though we still foresee great challenge in the future, I am convinced that, the two sides will surly seize new business opportunity and gain mutual benefit by joint effort.
Splendidness achievers
July 1st, 2007 marks a 10-year anniversary for Hong Kong’s returning to homeland. These years, Hong Kong has experienced a devious route for economy, impacted by financial crisis, 9-11 event and SARS. However, with central government ‘s preferential policy, support of Guangdong’s local authorities and Hong Kongese’s efforts, the city can still maintain its growth and thrive with outstanding achievement.
In fact, Hong Kong and Guangdong are closely related and mutually dependent, which can be reflected in toy industry. When moving their production lines northwards, Hong Kong toy companies started investment in Dongguan, Shenzhen, and then Zhongshan, Guangzhou, Foshan and other cities. Some companies preferred making orders to new toy factories in local by means of compensatory trade. In 2001, Toys Manufacturers' Association of Hong Kong (TMHK) released a survey report on business environment for Hong Kong’s toy industry, having the following conclusion:
A majority of respondents have business operation in Pearl River Delta. Most of Hong Kong toy companies’ business in mainland is manufacture of originating product and toy parts, processing and quality inspection, while business in Hong Kong is aimed at scientific research, design, wholesales and agents, as well as imports and export operation. Most of respondents companies deal with upper or mid reach business of toy industry, coming with not many retailing.
Within the passing 28 years, especially the decade after Hong Kong’s returning, she has been cooperating closely with Guangdong, creating splendid scene for the both side.
From Hong Kong: information, funds, technique and management tactics are bought to Guangdong, resulting in huge changes.
Moving production to PRD, Hong Kong industry has successfully lowered production cost and regained competitive edges.
The two sides work together in constructing advantage in industrial cluster. Industrial cluster is a production mode, by which companies in a specific region focus on a same industry and cooperate and compete with each others with support of related organs.
Toy factories established in PRD see preferential terms from central and local government. Meanwhile, with full extent of opening-up policy, Guangdong boasts abundant labor resource and convenient transportation to Hong Kong. Furthermore, related governmental department of Hong Kong always sends organizations and groups to aid companies in improving production and sales, which has effectively strengthened the toy cluster in PRD and evolvement of toy business.
When production lines were set in Hong Kong, most of products were plush toys and simple plastic toys, which were easily assembled and had low added value. Nowadays, electrical and electronic toys dominate production, which have high content of technique.
From Guangdong: preferential terms and infrastructure are provided to support Hong Kong-invested companies’ growth. At the same time, local toy companies progress by learning from successful experience of Hong Kong.
With over 20 years of development, Guangdong’s toy industry has been generally accepted as the largest toy production base in the world. Toy sales in 2006 accounted for 121.96 billion RMB. It exported goods to 186 countries and regions, accumulating an export value of 14.06 billion USD—79.2 percent of national export. With a $280 million import, Guangdong made up 65.3 percent of national import. It is rich fruit growing by the two sides. Of course, other countries and regions also have made great contribution to Guangdong’s flourishing toy business with respective investment.
To meet new challenge
As a whole, world economy is growing in a stable way presently. Consumption standard in emerging markets shows an uptrend. These can be translated into greater capacity for toy sales market, which serves as good environment for the industry.
However, we see higher threshold when entering major export market and some medium and small business feel difficult to adapt to new standards. In view of excessive favorable balance on export，which has aroused strong reaction of some importing countries, China lowers tax reimbursement for export to 11 percent from the previous 13 percent. Higher salary and shortage of workers, unstable power supply, high cost of raw materials and export and other factors have squeezed down profit margin of toy makers.
In recently years, Guangdong has exerted great power in rectifying contaminating industries. Plating industry is required to tally with national standards by the end of this year. A great number of toy products depend on plating for their metal surface, so they are difficult in operation now.
In view of the existing problems, I hold that some effective measures could be adopted to face up to challenges:
Firstly, all or parts of production lines could be moved to mountainous regions in Northern Guangdong, or east and west wing of the province. Compared with PRD, these areas are less harsh in labor resource and are in lower salary cost. Along with relatively stable supply of power and lower price, they are good solution to the problem of high production cost. In fact, some Hong Kongese have moved their production to Qingyuan and Heyuan, successfully reducing cost.
As the development of domestic economy, China’s toy market trends to be much more mature. Parents now have positive recognition on toys. Items that can develop kids’ brain power, patience, concentration, as well as limb movement and hand-brain coordination, are favorites for both kids and parents.
Toy industry in Hong Kong and Guangdong are expected to tap into domestic sales market, where higher, mid and lower-end toys all see rapid growth in sales.
Hong Kong and Guangdong are rather advantageous in the process of exploiting domestic market, I believe. Most of domestic brands feature lower price, but not delicate enough. Product idea is excelled by brands from Hong Kong and overseas makers. Additionally, domestic market has high regard for Hong Kong’s toys, which are in good design, high end and safe property. With all these edges, Hong Kong will see great potential in domestic market, which attaches greater attention to quality and design.
As a bridgehead on the way towards domestic market, Guangdong is an ideal place for testing market response and carrying out campaign. However, Hong Kong’s brands, especially new ones, may not necessary attract big department stores and dealers in mainland. Therefore, great effort is expected for knowledge on domestic demand.
Expectation on Guangdong government
In view of further development I have expectation on Guangdong government.
Though a small number of Hong Kongese have moved their production lines to mountainous areas, most of them still hesitate at moving, for the sake of inconvenient transportation in mountainous areas and eastern and western Guangdong. Moreover, neither living mode nor city supporting facilities in these areas can compare with those in cities of PRD. After all, production chain is connected by various companies in upper and lower reach. Alternation on any link of the chain will affect productivity and efficiency. Therefore, it is necessary to improve transportation and infrastructure, help to find solution to difficult in employment and launch preferential policy as soon as possible, so as to attract more factories to these areas.
Plating is indispensable part in the toy industrial chain. Therefore, we expect that, local government may attach importance to the significance of PRD’s toy cluster, and treasure and consolidate the effect of the industrial cluster. When Guangdong is impelling industry reconstruction and central government modifying policy on processing trade, we expect cautious proceeding so as to protect the connection of the whole production chain of toy industry.
Conclusion
During the past 20 years, toy industry cluster constructed in PRD by the joint effort of Hong Kong and Guangdong has successfully created the largest and most effective toy production base in the world. Facing the challenge ahead, it’s believed that, the improving its technique and invest more resources, up-and-coming industry cluster will produce more welcome novel toys with new element and latest technique, which will correspond with development and demands of overseas and domestic markets. In the future, I am convinced, cooperation between the two sides will bear rich fruits.
About the writer:
Jeffery Lam, member of HK Legislative Council and chairman of TDC Toys Advisory Committee |