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No fun for toy firms in Guangdong

By Du Xiaoli (chinadaily.com.cn)
Updated: 2008-08-18 18:37

The toy industry in South China's Guangdong province experienced a decline in the growth of exports between January and July, according to China Business News.

Influenced by many factors such as the US subprime credit crisis, the appreciation of the renminbi, export tax rebate cuts and rising production costs, China's toy exports reached $4.18 billion in the first seven months of this year, up only 2.1 percent. The growth declined 22.4 percentage points year-on-year.

Guangdong, which always accounts for about 70 percent of the country's total toy exports, exported $2.91 billion during that period, up 4.8 percent year-on-year. The growth declined an astonishing 39 percentage points.

A total of 1,404 toy enterprises in Guangdong had export records from January to July this year, of which 374 were newly-added enterprises, according to the latest statistics from the Guangzhou Customs. Compared to the same period last year, 3,618 enterprises quit the export market, accounting for 77.8 percent of the total export enterprises in the same period last year. More than 2800 quit and they were mainly private enterprises.

Orders became concentrated on scaled enterprises. Statistics indicated that the number of Guangdong enterprises with toy exports of more than $10 million in the first seven months of this year reached 45, six more than the same period last year. Their aggregate exports hit $1.63 billion, accounting for 55.9 percent of Guangdong's total toy exports in the first seven months of the year.

Enterprises with exports of more than $100 million reached four, one more than the same period last year. The aggregate exports of the four enterprises hit $710 million, accounting for 24.4 percent of the total exports. Meanwhile, the total exports of the 3,618 enterprises that quit the export market only reached $220 million from January to July in 2007, just accounting for 7.8 percent of the total exports during that period.

According to a large State-owned toy export enterprise in Guangdong, its orders increased this year due to large purchasers paying more attention to product quality, but profits became thinner and thinner due to the acceleration of the yuan's appreciation and the big rise in the cost of labor and raw materials.

To avoid losses, the company chose to accept high value-added orders and transferred some orders to toy plants in Hunan and Jiangxi provinces for processing.

Currently the situation of purchasers transferring orders on a large scale has not been encountered, according to the company. But overseas purchasers may transfer some low-price orders to other Asian countries or regions due to rising costs in the Pearl River Delta.

Some small and medium enterprises that depend on low price competition are facing big pressure. On one hand, the orders decreased obviously, on the other hand, they cannot digest rising costs due to weak negotiation abilities. Thus many toy export enterprises closed while large enterprises have stronger self-adjustment and anti-risk abilities.