Trade efforts heighten amid promising forecasts

	This rattle and teether from Canfine comes in a stuffed toy octopus design. The model adopts CVC velour and polyester filling.

Manufacturers of infant toys in China remain optimistic exports will improve despite a range of industry challenges.

One reason for the positive outlook is the rise in demand stemming from the baby boom in markets such as the US. Beginning 2002, the country has reported high birthrate levels that are expected to continue until 2015. The surge is boosting the consumption of infant products, half of which are play items.

Resultantly, a number of companies, including Hoping Toy Works Ltd Yangzhou, project overseas sales climbing 25 to 40 percent in 2010. Others even predict an upsurge of 50 percent.

Signs of economic recovery have also spurred exports. This trend is actually characteristic of China’s entire toy industry, with most suppliers expecting 5 percent growth in the next few months. In Guangdong alone, January to February 2010 shipments of play items rose 26 percent YoY, totaling $720 million. For February, outbound sales hit $330 million, which is 47 percent higher than in 2009. The province accounts for nearly 70 percent of the country’s total toy exports.

Also contributing to this upward shift is the resurgence of demand from conventional markets. Guangdong’s shipments to the US and the EU, for example, jumped 15 and 27 percent within the first two months of 2010. Orders from the former equaled $260 million, while variants for the EU generated $170 million.

Increased trade to emerging locations also strengthens business. To illustrate, Guangdong play models sent to the ASEAN during the same period escalated 110 percent YoY. Sales totaled $51.5 million, making the economic block the fourth- largest destination for such China products.

To sustain growth and ensure viability, suppliers are taking steps to counter various issues, including labor shortage.

With the establishment of competitive factories in the inland provinces, plants in the coastal areas are experiencing difficulty hiring and retaining migrant workers. As a result, companies are forced to raise minimum compensation levels to attract employees. Specifically, salaries in Guangdong and Shanghai have gone up 20 and 15 percent, while those in Zhejiang and Jiangsu provinces climbed 15 and 12 percent.

Additionally, makers are struggling with higher material outlay. Since 2009, oil and fiber rates have been increasing amid the devaluation of the US dollar, which has adjusted more than 7 percent.

Oil, for instance, rose from $35 to $80 per barrel in October. In November, the national cotton price index reached $2,205 per ton. Spending for synthetic fabrics, plastic and metal was augmented as well.

In response to the resultant elevated operating outlay, more factories are upgrading production to cater to environment- friendly models. Although this moveinvolves costlier inputs and processes, the increasing demand for “green” toys provides more leeway to modify prices, thereby offsetting added expenditure.

Specifically, many are adopting sustainable materials such as organic cotton, milk and soybean protein fiber, and bamboo rayon. Some suppliers apply natural ink, which is water- or soy- based and lead-free.

Manufacturers are also keeping up with the latest toy safety policies, especially as rules for infant types are more stringent. This, however, has taken a toll on businesses, decreasing export numbers.

For instance, with the modification of the Canada Hazardous Products (Toys) Regulation in July 2009, shipments to the country dropped 28 percent in 3Q09.

Compounding the issue is news that Japan and several other nations are planning to adjust requirements on imports.

Additionally, there are greater recall risks due to the amended laws. In 2009, 393 types of China toys were banned by RAPEX, accounting for 40 percent of the total items barred in the EU. That year, similar goods were also sent back 31 times by the CPSC. The situation is said to continue in coming months.

Further, the imposition of stricter rules increases outlay as extra testing and certification are needed.

To counter this challenge, suppliers continue expanding into emerging markets as these areas have fewer product restrictions, minimizing examination costs.

Moreover, many companies are taking advantage of the zero tariff agreement within the China-ASEAN Free Trade Area effective Jan. 1, 2010. This pact will not only lessen spending, but also ease the entry of exports, thereby boosting profits. Other companies, meanwhile, are targeting the domestic market.

Products & prices
Industry demographics

Infant toys from China consist mainly of bath and foam variants, rattles, teethers, mobiles, soft types and books, activity mats, pull-and-push, and developmental releases.

Bath and foam toys are commonly nontoxic PVC, PEVA, EVA or PE models, measuring 3 to 6in. Ranging from $0.25 to $1.50, these come in duck, fish or other animal designs. Water-resistant baby books are also available.

Recent versions can be fitted with electronic add-ons such as spinning, flashing and musical functions, and exceed $3.

Rattles are offered in fabric, plastic or wood. The first adopts fleece, velour or velboa, while plastic types use PP, ABS or TPR. The last utilizes birch or beech. The items come in animal, flower, clown and horn styles, and are about 6in. They are priced below $3.

Teethers are mostly made of TPR or silicone, and are between $1.50 and $3.

The latest releases in this category are multifunctional and combine different materials. For instance, a dog-shaped model can have a fabric head, plastic ring-shaped torso and silicone arms.

Mobiles, meanwhile, are built with two to four crossed bars or one dome-shaped frame. These carry between four and 10 hanging attachments, and are quoted at $1.50 to $10.

The basic structure uses ABS or solid wood. The ornaments adopt ABS, fleece, velvet or velour. Bamboo and other types of wood are also utilized.

Variants are classified further as nonmotorized and motorized. The first is generally a stationary type priced at $1.50 to $4.

Motorized kinds are either wind-up or battery-operated. The former has five to 10 attachments and boasts sound ICs. These go for $4 to $8.

Battery-powered versions are fitted with more ornaments and electronic functions, including musical, voice recording, light and volume options. They are $10.

On average, quotes for infant toys have risen $0.61 to $0.66 by the end of 2009. Compounded by increasing operating costs, businesses expect prices to climb 10 percent in coming months.

As for R&D, suppliers emphasize usability and practicality in releases. Most manufacturers offer multifunction models. For instance, they are turning out edutainment variants such as stuffed building block sets with printed numbers or letters. These types double as learning instruments, improving recognition while encouraging play.

Similarly, EVA 3D soft books designed for bath time interaction help promote mental development.

Additionally, there are plush toys fitted with silicone hands or feet, which work as teethers. Others combine stuffed figures with bath scrubs.

China’s infant toy supplier base shrank 50 percent to about 4,000 companies due to the economic crisis. Many small makers closed, while larger players were pushed to downsize operations.

Faced with the labor shortage, small factories now have fewer than 200 employees, while midsize ones maintain 300 to 500 personnel. Large enterprises, representing 10 percent of the industry, have 800 to 1,200 staff members.

Despite these conditions, the line still accounts for 20 percent of China’s total toy output, with share expected to rise in coming months.

The majority of releases are OEM- and ODM-based, especially as most clients remain cautious amid stricter safety requirements in the market.

Resultantly, makers continue to monitor design and production stages carefully. Bigger companies even conduct QC and testing procedures in-house. Smaller suppliers have items checked by third-party organizations.

Guangdong and Zhejiang are the key sourcing centers for infant toys in mainland China.

The first is the largest manufacturing and export base, hosting more than 2,000 plants. About half are backed by external investors, including those from Hong Kong. Factories are mostly found in Shenzhen, Dongguan, Chenghai and Shantou.

In addition, Guangdong is known for releasing upscale products such as electronic designs.

Zhejiang, meanwhile, is home to 1,300 companies. The area accounts for 8 percent of all toy exports in the mainland.

In 2009, the province shipped $600 million worth of wooden, fabric, plush, plastic and ride-on variants. Roughly 60 percent of output is sent abroad, with 24 percent going to the EU.