'Made in China' jitters hit
Guangdong By Olivia Chung
HONG KONG - A spate of massive recalls of
Chinese-made toys not only affects the survival of
toy-manufacturing industry in southern China's
Guangdong province, but it has also raised
concerns over the future of the myriad
food-processing and manufacturing industries that
help anchor much of the area's thriving economy.
China has been battling a blizzard of
warnings and recalls abroad that have shaken
international markets' confidence in the "Made
in
China" label on products ranging from toothpaste
and toys to blankets, tires, food and mattresses.
Toymaker Mattel on Tuesday announced a
third recall of Chinese-made toys, saying it would
take back more than 800,000 units globally with
"impermissible" lead levels.
Mattel in the
past five weeks had already announced two recalls
of millions of Chinese toys because of excessive
amounts of lead paint and other dangers.
Last Friday, China's General
Administration of Quality Supervision, Inspection,
and Quarantine (GAQSIQ) announced new rules to
bolster its national recall system. The new rules
say that if the faulty products are not
voluntarily recalled by the manufacturers, the
government will do it and fine the producers up to
three times the value of the products.
The
GAQSIQ also said on its website that it will
conduct a nationwide investigation into licensed
toy producers and exporters in an effort to weed
out "unqualified" ones. Unqualified manufacturers
and exporters will have their export quality
certificates revoked, it said.
Guangdong
province, where 68% of China's toy-export industry
is based, has been hit hardest by the increasingly
stringent regulations and recalls. That's why the
"Made in China" safety scare has also been
described by the industry as the "made in
Guangdong" crisis. Official statistics showed
China exported 22 billion toys last year,
accounting for about 60% of the global total in
terms of volume, making it the world's largest toy
exporter and maker.
Other area industries
have also been hit, including two separate recalls
of more than 1,300 Chinese-made foam mattresses
that were sprayed with toxic insecticide and sold
in a chain of Dutch bedroom-furnishing stores and
blankets found to contain high levels of
formaldehyde in Australia and New Zealand.
To make it worse, the Guangdong industries
are also suffering from a steady increase in
prices of such items as paint and chemicals
because of a shortage of raw materials such as
aluminum and stricter environmental regulations.
According to China Paint, an
aluminum-paste manufacturer, one of its upstream
chemical suppliers raised prices eight times in
2005 and 11 times in 2006 because of a global
shortage of aluminum. And Wilson Yu, southern
China sales manager of Dainippon Ink &
Chemicals (HK) Ltd, a pigment supplier for China
Paint, said it had no alternative but to raise the
prices after reporting years of losses.
"In the last few years, when intermediate
suppliers of chemicals raised their prices due to
increased costs, we did nothing and absorbed the
price increase ourselves," he said. More stringent
environmental regulations have affected some of
the chemical suppliers, which have forced either
been to shut down or raise prices to meet the new
standards, he said.
Yu said he believes
the mounting costs of aluminum and pigment will
force some paint manufacturers to raise prices or
even close down, which eventually will place
increased cost pressure on the toy manufacturers,
which are already feeling the strain.
According statistics by a Hong Kong
toy-manufacturing association, toymakers are
closing down at the rate of 10% every year in the
Guangdong city of Shenzhen, which currently has
about 1,200 toy factories.
David Chiu,
chairman of the Hong Kong Small and Medium
Enterprise Progress and Investment Association,
urged international importers to throw Chinese toy
manufacturers a lifeline by not demanding the
lowest price for their items. Chiu claimed the
toymakers are already working with "wafer-thin"
single-digit profit margins.
In addition
to increasing costs of labor and raw materials and
the steady appreciation of the Chinese currency,
the yuan, toy manufacturers, along with most Hong
Kong traders and manufacturers engaged in
electronic, clothing and food manufacturing on the
mainland, are struggling as the central government
slashes or eliminates tax rebates for about 3,000
export products to reduce the huge trade surplus
and resolve trade conflicts.
But the
Guangdong Toy Industry Association and Shenzhen
Toy Industry Association also struck an optimistic
note by saying new regulations and restrictions
would force more than 5,000 toy manufacturers in
Guangdong province - 80% of which are processing
and manufacturing firms - to undertake an economic
restructuring to maintain their growth.
"The increasingly stringent regulatory
requirements in relation to environmental
protection and export are an issue facing low-end
and labor-intensive enterprises, which could help
weed out the backward and labor-intensive
industries and enterprises in the province,'' said
Zhang Naijin, director of the regional development
center at the Management Science Research
Institute.
Olivia Chung is a
senior Asia Times Online reporter.
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