Happy New Year! In the passing days in 2007, sticking to its tenet of “Close to Industry, Attentive to Market”, TOY INDUSTRY has walked along with readers. China’s toy industry, in last year, has confronted various fiery trials. The same year has been engraved on many minds. It is also the same year when we has endeavored to provide painstaking service and provide more practical and in-depth news for those who have great concern about the prospect of China’s toy industry. Our view has been widened and great opportunity has been created.

Let’s retrospect to the great events. Previous keywords carve out new fulcrum for the development ahead.

Keyword- Recall

Affair:

China’s toys, which enjoy global reputation and market for their “high quality and low price”, experience a bleak weather, though it’s between summer and autumn. A large quantity of toys exported to US was recalled in the nation. The affair only turned more intense, with influence spreading allover the world. Finally, all these impinge heavily on China’s toy industry.

The tumultuous toy recalls surge since the mid June 2007. Firstly, CPSC cooperated with RC2, the US toy maker, to announce a recall on 1.5 million wooden Thomas & Friends toy sets, whereafter a series of recalls emerge in succession, including those from Mattel.

Media play-ups has in fact aroused an adverse current, advocating “threat from China’s commodities”, which rapidly get diffused. It has gotten up a panic among some people who become anxious upon China’s goods. As a result, image and reputation of China’s toys have been severely affected. National toy export stagnated for a time in September

In view of the situation, China’s government made promote reaction. Li Changjiang, director of AQSIQ made public response in a special feature produced by CCTV. Concerning various overseas questioning against products “made in China”, he promised that, Chinese government would go further to strengthen international communication and cooperation on quality supervision and would guarantee quality of exported toys.

On September 21, Mattel made its statement, admitting that its three previous high-profile recalls are result from American design defect, instead of China manufacture. Mattel said it would assume all responsibility for recall and apologized to Chinese side.

Thus, with joint effort of China and US, the wave of recall gradually quiets down.

Comment:

With two decades of rapid development, China has evolved into the largest production base and exporter for toys in the world. Approximately, products “made in China” compose 70 percent of global toy market. All data show that, China’s exported toys see high up-to-standard rate, coming with good quality. Trade protectionism in some countries haunts behind the recalling wave.

However, we should recognize that, the large amount of export is based on OEM. China has a small percentage of original brands so we share no high profit. Currently, how to cement communication and cooperation, optimize product mix in export and reduce trade friction are not only the affairs of the state, but also the responsibility for every enterpriser. We expect that there would be no such recalls any more.

Keywords-Toy quality and safety

Affair:

“Toy quality and safety” are considered one of the most topical words in 2007. High-profile recalls have forced the quality and safety problem of China’s toys to the teeth of the storm. China’s international image and reputation have been badly affected. Coming with strong sense of responsibility, China has take active measures to communicate and negotiate with US’s officials, seeking effective ways to guarantee exported toys.

In mid August, Certification and Accreditation Administration (CNCA) and AQSIQ made deployment one after another, launching new license system on exported toys and enhancing supervision. Compared with the older License Administrative Measures on Quality of Exported Toys, which had been enforced since 1992, new system sees lots of new terms.

From September to December, a rectification battle stormed in the country, targeting at quality and safety of exported toys. Among more than 3,000 companies that engaged in the business of toy e port and acquired quality license, exceeding one third was cancelled or paused export, or ordered to rectify operation. Moreover, on August 31st, China’s recalling system that has been brewing for a long time was enforced. The system nails down that producer is the first entity responsible for defected toy.

July and November, US-China Toy Safety Conference was held. It is the first time the event held twice a year. During the September and October, Ministry of Commerce, AQSIQ, Department of Foreign Trade and Economic Cooperation of Guangdong Province （GDDOFTEC）and Guangdong Toy Association (GDTA) have organized several large training course in Guangdong, concerning safety management of exported toys. Curricula include quality assurance system in China, latest regulation and standards in European and US, as well as countermeasures to affairs related to toy export. Timely and practical training courses were warmly received by companies, thinking that it offered good guidance for enterprises.

Comment:

Affected by recalls and new version of license for exported toys, China’s toy export once came to a standstill in September. But one month later, toy export rebounded in large margin. So far as Christmas sales 2007 is concerned, western consumers have been regaining their confidence on toys “made in China”, who are maintaining comparatively high recognition. A survey run by Ministry of Commerce also reveals that, lots of toy companies have received great number of overseas order, with no obvious decline. China’s place as the most significant production base could not be superseded for this moment.  

Even 1% pressure would be turned into 100% of impetus. Through market baptism and comprehensive rectification, China’s toy companies would have much higher awareness on quality and safety. Overall improvement of the industry would lay a solid foundation for substantial development.

Keywords-3C implementation

A 15-months transition period for China Compulsory Certification (3C) came to an end on June 1st, 2007 and afterwards, it began to be enforced mandatorily. According to related directives, products that involved in 3C category are children’s vehicles, electric toys, plastic toys, metal toys, shooting toys and dolls. Those with no certificates or label are not allowed to be shipped out of factories, sold, imported or used in other business event.

In view of actual highlights, CNCA promulgated a notice on implementation. It is required that, when enforcing 3C, quality inspection departments to make difference between actual situation, with clear dividing line of policy in mind. As implementation run further, companies that had maintained a wait-and-see attitude finally made response, especially medium-sized ones that have good popularity and considerable market shares. Amount of applicants were surged up and applied categories were widened. Whether one have 3C certificate or not would have directly affect his business. Brand consciousness wakes up at large.

Toy 3C has imposed great influrence4 on the business-some are obvious and some are to be disclosed. Changes appear in production chain gradually. First, function of wholesales market has been weaken to some extent. Secondly, big department stores have gained enhanced awareness on brand. Thirdly, supermarkets are actively adjusting their product mix, coming with stronger recognition on brand as well. Fourthly, region agency has become the key supplying channel for makers. Meanwhile, 3C process would slow down the launching of new items. The Retailing Research on the third quarter last year shows that, blank emerges transitorily in market.

In December 2007, CNCA released a bulletin, re-emphasizing affairs related to administrative enforcement, which stirred great concern among toy industry.

Comment:

Enterprises work in a most substantial and practical way. From wait-and-see attitude to get-up-and-go application, what they are confronted with enforcement power and publictrust of government. For this moment, 3C on toys is still in a stage grinding-in stage. Quite a few of detailed problem would appear which are to be solved immediately. In fact, related governmental departments and commissions are in close attention to the process. We believe that, toy 3C will soon show its positive influence on market and consumption.

Keywords-Canton-HK cooperation

Affair:

July 1st, 2007, the 10 anniversary for Hong Kong’s returning to her motherland. During the past decade, toy industry of the two cities is closed related, achieving mutual benefit and development. Status quo and prospect of cooperation are arrest all attention.

Toy industry is a strong point for Hong Kong, where good amount of novelty design emerge. Its products have great competitive edges in global market. From the begin of 1980s, in order to reduce production cost on labor force, land, water supply and power, toy companies in Hong Kong had gradually moved most of their production line to mainland, while design and sales centers are maintained in Hong Kong. By the help of location, Guangdong had become a destination for the move. Coming with annual production value of over 100 billion RMB yuan, Guangdong owes a lot of its flourishing to Hong Kong’s investment, besides successful reform and opening-up policy. It is the great achievement from Canton-HK cooperation.

With a dozen years of rapid growth, Guangdong toy industry is now faced with the same toughness as Hong Kong did. How to relieve from the pressure resulted from higher production cost, how to adjust export product mix and how to maintain sustainable development arouse great concern of the whole industry.

Jeffrey Lam, managing director of Forwind Winsome Industries Ltd and president of Toys Advisory Committee of Hong Kong Trade Development Council (HKTDC), has written article for TOY INDUSTRY in his column-- Reflection on Moving of Toy Makers in Pearl River Delta, reviewing the history when Hong Kong-invested companies in Pearl River Delta striking for development room and discovering new ideas on cooperation.

In November, HKTDC and Toys Manufacturers' Association of Hong Kong (TMHK) organized a business group to make investigation in Guangzhou, focusing on domestic toy market environment as well as pattern and channel that Hong Kong investors could select. Such a large team with over 30 members made it rare occurrence.

Comment:

Domestic economy maintaining its powerful growth, consumers’ brand recognition becoming stronger and protection for IPR also turning for the better, all these contribute to huge market attraction, especially when we are haunted by higher export threshold. Toy companies from Hong Kong have changed into new idea, not stickling to original cooperative pattern. We expect that Canton-Hong Kong cooperation would be carried out in a more profound and abundant way.

Keywords-Trendy product

Affair:

When we are reading the bestsellers in 2007, Transformers ranks absolutely high. Owing to the blockbuster in summer, Transformers toys staged a comeback. The momentum spread allover the country. Optimus Prime, Bumblebee and Megatron—three most popular characters in the movie have boosted related products sales. Some even got out of stock. Some stores told TOY INDUSTRY that, even their overstocked items have been sold out. What’s more exciting, except for Transformers, other toys coming with transforming function have taken off as well.

For these years, Auldey has good expectation on animation, movies and TV series, which would boost up sales of trendy products. In 2006, Blazing Teens, the first TV series the toy maker invested made striking success. A second series was launched in 2007, arousing heating market for yoyos. Auldey has reaped great profit, recording a historical-high annual sales value in the year—450 million RMB yuan. Its domestic sales increased by 50 percent or so.

In addition, Lindo, partnering with Bandai, launched KeyBots, which comes with strong playing value. Supported by animation, games and commercial, it has gained good market as well.

On the other hand, Honey Bee and Gyrotor of Silverlit pursued in a different way. Though with no animation, excellent orientation and function make the two hobby goods warmly received by consumers. One year after their release, they have still among the list of prevailing toys for kids.

Comment:

Consumers’ affection on animation helps boost the Transformers toys. Kids when got fascinated by the animation in 1980s now grow up into the key group with strong consumption ability. When the characters come back, their emotion burst out once again. Not only as collectibles, these toys are always presented as gifts to their kids. It is a kind of culture transit.

Relating toy with animation to endow the former with cultural content has become a common sense and choice for many toy companies. Answering to such a demand, in Guangzhou Int’l Toys & Gifts Fair 2007, an “Animation and Comics Licensing Conference” was initiated, welcomed by toy exhibitors and buyers. In 2007, animation and comics show ran briskly, receiving more toy companies and enjoying better effect.