MUMBAI - India's toy industry has received with mixed emotions a six-month
government ban on Chinese toy imports which can only add to the woes of the toy
industry in China. The ban is also a hiccup in the US$50 billion trade
relations between India and its largest trade partner.
China's embattled toy industry was already struggling to sustain its status as
the world's biggest maker and exporter of toys. The January 23 ban, announced
by India's Directorate General of Foreign trade, came just a day after the
Chinese Ministry of Commerce posted statistics revealing that nearly 1,000
Chinese toy exporting companies in its Guangdong province had closed in 2008.
Guangdong province alone manufactures about 70% of the
nation's toy products, with annual profits averaging $6 billion. Serious damage
to Guangdong, considered the country's richest province, inevitably hurts the
Chinese economy as a whole.
According to customs statistics from Guangzhou, 922 toy exporters in Guangdong
went bust in 2008, leaving 2,167 left from the 3,089 toy exporters which were
operating in late 2007. In happier times in 2001, Dongguan, the toy
manufacturing center in Guangdong know as the world's "toy capital", had over
4,000 toy factories and nearly 2,000 suppliers.
Significantly, the toy ban came a day after India expressed objections to
Pakistan "outsourcing" its foreign policy to China, with Pakistan Foreign
Minister Shah Mahmood Qureshi on January 22 giving China a "blank check" to
negotiate with India in resolving the crisis in relations sparked by the
November 26, 2008, terrorist strike in Mumbai. The toy ban could be a rebuke to
Chinese interference in its relations with Pakistan, currently the greatest
challenge facing the Congress party-led government in Delhi.
China's troubled toy industry, a critical component of the export-based
economy, provides jobs to an estimated 20 million migrant workers in Guangdong.
According to the latest available statistics from the Beijing-based China Toy
Association, India's import volumes in 2006 put it in the top 10 list of global
destinations for Chinese toy exports.
The Chinese government has admitted that "large quality recalls by
international toy giants, including Mattel Inc, hurt the industry as Western
countries raised standards to ensure toy safety". Another factor was, "rising
prices for raw material and labor, along with a stronger Chinese currency,
which raised production costs by 25% for most companies".
In July 2008, Cheung Shu-hung, the head of a Chinese company, hanged himself in
his warehouse after Mattel recalled a million lead-tainted toys that his
company produced. (See
Death of the 'toy king'
Asia Times Online, August 18, 2007.)
In November 2008, a protest by about 500 toy factory workers turned violent,
with the crowd smashing police cars after they were sacked from the Kaida Toy
Corp Ltd in Zhongtang Township, Guangdong province.
Analysts have pointed out various fundamental problems in China's toy-export
industry. Most producers do not have their own brands, and usually they are
original equipment manufacturers (OEMs), who make products that are then sold
abroad under a foreign company's label. (See
Playtime is over for China's toy industry, Asia Times Online, June 21,
2006.)
The livelihoods of many wholesalers and retailers in India's $510 million toy
industry depend on cheaper Chinese toy imports, but Indian toy manufacturers
could be rejoicing - business is expected to shoot up by 30% as a result of the
ban, which covers musical instruments, electric trains, puzzles, wheeled toys,
dolls, stuffed toys, toy guns, wooden and metal toys.
Retailers are not happy. "The ban on Chinese toys is a mistake," Narain Das,
owner of Toy Kingdom store in New Delhi, told Asia Times Online. "It came about
as a result of pressure from domestic manufacturers after toy imports from
China last year crossed rupee 1,000 crores [$204 million]." Das said his
customers had no complaints with Chinese toys.
Surprisingly, no specific reason was given for the ban, particularly given that
trade with China is expected to grow to $100 billion by 2012, nearly one-fifth
of India's overall annual $525 billion trade with the world, according to
Department of Commerce estimates released in April, 2008.
"We welcome the decision. It is good for the industry," said Raj Kumar,
president of the 13-year-old Toy Association of India (TAI), an apex body
representing 600 Toy industry members. He was quoted by the Press Trust of
India as saying that the industry was "pleasantly surprised" by the Commerce
Ministry decision.
However, Raj Kumar was less sure of the ban's benefits when Asia Times Online
contacted him in his New Delhi office, with his newfound caution suggesting
that pressure from the toy retailer's lobby was forcing the TAI to reconsider
its earlier joy.
"We don't know the reason for the ban and our trade association is having
various meetings to decide on the issue," Raj Kumar said. "We cannot say right
now whether we are happy or unhappy about the ban on Chinese toy imports."
Kumar's earlier "pleasant surprise" may have been because the ban appears to be
more aimed at protecting the unorganized Indian domestic toy sector, rather
than the health hazard fears which prompted the US import ban on Chinese-made
toys.
The Toy Association of India estimates that 90% of India's toy industry is in
the unorganized sector, despite the presence of global majors such as the $5
billion Mattel and $3 billion Funskool.
"The major difference between the Indian toy industry and Chinese is while the
major portion of the Indian toy industry caters for the Indian market, the
Chinese toy industry is basically contract manufacturing," K John Baby, the
chief executive officer of Funskool told Asia Times Online. He predicted a 15%
to 20% annual growth rate for India's domestic toy industry, much of it in the
unorganized sector.
A Commerce Ministry statement last April also said, "Sports and toys are mainly
produced by our unorganized labor intensive sector." The Commerce Ministry
announced tax sops as well as declaring the sports and toy industry a priority
sector under its Market Development Assistance and Market Access Initiative
schemes. The ban comes ahead of an upcoming announcement by the Department of
Telecom on a possible ban on Chinese-made mobile phones.
Despite their mixed emotions over the ban, India's toy industry could well have
to put its differences aside and focus on the future, as the newspaper The
Economic Times reported on January 26 that government officials had confirmed
that the six-month ban was "likely" to become permanent.
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