Part 1: When China Sneezes the Toy Industry Gets a Cold; what I’m watching

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If you are active in the toy economy, it pays to pay attention to China.  Not only does China control 86% of the world’s toy manufacturing but it has been busy building its domestic toy markets.  According to Euromonitor’s Utku Tansel speaking at last year’s  World Congress of Play, China is now the number 2 traditional toy market in the world.  So, China is now a double threat and a double hope for the rest of the world’s play companies.

It is with that in mind that I wanted to share two articles that recently caught my eye.  The first involves the recent sharp decline in Chinese currency values.

China’s control of the world’s toy manufacturing is so total that it is imperative to follow the cost of making those toys.  According to Keith Bradsher in his New York Times piece, “A Policy-Making Mystery in the Renminbi’s Decline,” the decline in the Chinese Renminbi is reducing the cost of making toys in China.

That is good news for companies who export Chinese made goods to the U.S., Europe, Japan and other developed and developing countries.  Those cost reductions can be used by manufacturers and retailers to recover some lost profits or to reduce prices and generate more sales by appealing to price driven consumers.  On the other hand, it is not as good for the rest of the world as Bradsher puts it, because the  “…drop is… making it harder for foreign companies to compete in China and other markets where Chinese exporters have a significant presence.” 

 

So, why is China allowing its currency to decline in value?  According to Bradsher, “the currency’s weakness helps create jobs and limit unemployment in China"  That choice is not, however,  without risks.   I will write about that and China's labor problems in my next posting.

 

 

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