Christmas chill hits manufacturing hub

No fun for toymakers

The Christmas chill from the economic woes of the West is also being felt among many related businesses in Guangdong's Shantou city, a major toy-producing area in China.

Lin Wei, the head of the toymaker Big Tree Toys, says the toy industry is in the midst of a downturn, and smaller businesses are being more severely affected.

"The whole industry has experienced a 30-percent drop in business, and the crisis in Europe and slow US economy are having a marked effect," Lin said.

The 40-year-old started Big Tree almost a decade ago and his toy company is now considered one of the largest of its kind in Shantou, involving sectors such as original equipment manufacturing (OEM), trading, supply chain management, sales, designing and branding. It handles about 400,000 types of plastic toys through more than 10,000 toy-related businesses - half of the number operating in the area. The licensed toys it has helped produce include the US brand Barbie and the Japanese brand Hello Kitty.

The company boasts the largest toy showroom in Shantou. It works with more than 8,000 toy manufacturers and represents more than 300,000 toys and entertainment-related products.

Lin, who is also deputy head of the Shantou chamber of commerce, said Chinese factories churn out about 80 percent of the toys made in the world. His company, which has more than 90 percent of its business in exports, itself reaped 200 million yuan last year and is expected to take in 300 million yuan this year, Lin said.

"Christmas orders traditionally account for 60 percent to 70 percent of our business, and those from large markets in the United States and Europe have dropped significantly. But our new markets in South America, India and Russia have helped to make up for the shortfall," Lin said.

Similar to Guangdong's Christmas tree makers which are scaling back on frills to make their products more affordable for tightened Western purses, Chinese toy companies like Big Tree, which have the means to adapt to market realities, are also producing less sophisticated and cheaper toys.

"When an industry faces the crunch, the weaker and smaller players, as well as those which cannot meet quality or service standards, will leave the field. Those that are able to survive might actually do better as they seek out new markets with enormous potential," Lin said.

"We are now in such markets as Brazil, Mexico, Argentina and Cuba. We do almost all the toys there now."

Looking to home

But Shantou's toymakers are no longer relying much on exports and are not staying beholden to the uncertainties of the global economy.

"We are also investing more in the domestic market," Lin said.

"Toy chain stores, for example, are still a relatively new idea for Chinese consumers and we want to build on that through our own brands."

"Again, in quality, Chinese toy products have benefited from the stringent standards of the West in the past few decades and we are now capitalizing on that to expand our reach and market at home," he said.

"Chinese buyers still consider June 1 (Children's Day) and the summer holidays, as well as Spring Festival, as the significant periods for giving toys, not Christmas as it is celebrated in the West. Celebrating Christmas might be more common in large Chinese cities but it is comparatively absent in the smaller ones."

Peng is also working to expand the domestic market for Christmas trees and his company is using its production lull to move into the furniture industry and other industries to diversify its business interests. But he admits his industry will obviously continue to depend heavily on Western markets.

"Most of the trees we sell at home go to hotels and shopping malls that 'celebrate' Christmas. So we bulk up on the designs, lights and decorations for these clients," Peng said.

"Christmas is still very much a Western thing and our trees will depend on foreign consumers for a long time to come."

Chen Hong in Shenzhen contributed to this story.