China's toy makers’ Xmas profits slump
Afp, Shanghai
For years, China's thousands of toy factories and busy workers have dominated much of the global toy industry but now rising costs and faltering sales have left managers crying over miserly profits. With four out of every five toys going to the European Union last year made in China, business should be booming in the toy capital of the world -- China's Guangdong province -- but that has not been the case. The problems began in 2003 with the outbreak of Severe Acute Respiratory Syndrom (SARS), when industry buyers cancelled trips to the mainland, leaving sales in tatters and leading to a spate of bankrupticies. Companies in southern Guangdong, where more than half of China's toy exporters are based, have since been tested by rising raw material costs, mainly in plastics, as a result of soaring oil prices and a series of product problems which have undercut customer confidence. Hurricanes Katrina and Rita in August and September in the United States added to the pressure, raising concerns that US demand for the Christmas season would be hit just at the time when customers normally place their main orders. Combined, it means that for many of China's 8,000 toy makers and exporters, now 2,000 less than in 2002, the Grinch has already stolen Christmas. While sales were largely steady in the first eleven months of 2005, compared with a drop of nearly 25 percent in 2004, rising production costs have wiped out their profits, manufacturers say.
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