The "three big mountains" that increase toy exports without increasing income have hindered development

Xinhuanet, Guangzhou, November 9 (Xinhua)--With the growth of orders and the increase in export transaction volume, China toy export companies are shrouded in sorrow. Behind the growth in transaction data is the helplessness of falling profits. Toy exporting companies are facing the most difficult winter since the financial crisis. How should Santa Claus in China break through the dilemma?

Earn orders, no money, exchange rate changes eat up profits

Chenghai District, Shan Tou City, Guangdong Province, is one of the largest toy manufacturing bases in China. Chenghai's Christmas gifts and toys account for more than 70% of China's exports. There are more than 3000 related production companies here, employing at least 100,000 people. At the beginning of this year, many Christmas product manufacturers were beaming with joy as orders resumed growth. But now, as orders are delivered one after another and entering the export settlement period, many companies are about to cry.

Xu Songhui has been engaged in the Christmas gift production and foreign trade industry for more than 30 years. Since the beginning of reform and opening up, he has relied on Santa Claus to make a fortune and operated a small family workshop into a large factory with more than 1000 workers. In 2010, Xu Songhui, who had finally survived the financial crisis, received Christmas orders worth more than US$20 million in exports. To this end, he recruited 400 more workers to work overtime to complete production tasks. However, Xu Songhui was stunned when it came to foreign exchange settlement. ldquo; I have encountered a winter that is more difficult than the financial crisis." rdquo; He said.

The price of raw materials has increased by 30%, and the wages of workers have increased by 30%. It has been difficult to rush to complete the orders and reach the foreign exchange settlement period. It has also caught up with the appreciation of the RMB and eaten up 2% of the profits. This year's year is even more tragic than the financial crisis, increasing production but not increasing income. rdquo; Xu Songhui said.

Xu Songhui held a half-meter-high Santa Claus and said that this kind of Santa Claus, which can be sold for US$19 in the American market, was sold for US$5 from his factory. It was originally estimated that the gross profit could reach US$0.4 each, but in the end, he lost US$0.45 each.

From January to August this year, the export value of China's toy industry was US$5.988 billion, a year-on-year increase of 31.6%. However, the toy industry has generally experienced the phenomenon of increasing production but not increasing income. Xue Meng, secretary-general of the Toy Branch of China Chamber of Commerce for Import and Export of Light Industry Handicrafts, said: The pressure of RMB appreciation will further reduce the already low profit margin of the toy industry. In addition, as a labor-intensive industry, rising labor costs and labor shortages have put great pressure on enterprises. rdquo;

A survey of 239 China export companies conducted by B2B media group Global Sources showed that more than 60% of export companies believe that an appreciation of the RMB by 2% or more against the US dollar will have a negative impact on their exports. The instability of the money market has caused export-oriented foreign trade enterprises to face another financial crisis.

“Three big mountains oppress the living space of traditional toy companies

Rising prices of raw materials, increased labor costs and fluctuations in the RMB exchange rate have become three big mountains weighing on export-oriented foreign trade enterprises. Recently, more than a dozen large-scale enterprises in Chenghai have stopped production. Due to the improvement of the global economy, most companies said that orders in 2011 increased compared with 2010. However, due to unstable exchange rates, most companies are in a state of not daring to take orders, so as to avoid making one order and losing one order.

In order to retain workers and the market, companies have to choose short, simple and quick orders. Xu Songhui said that the increase in raw materials and labor costs can be calculated, so it can also be gradually absorbed by finding alternative materials and improving mechanization. Only the appreciation of the RMB is a fatal blow to enterprises. ldquo; It's like a race between turtles and rabbits. We try our best, but we are still far behind. Too many unstable factors cause us to be in a passive and disadvantaged position." rdquo; He said.

Regarding the unstable money market, many export companies have tried every means to reduce risks. Some choose bank hedging business to fix the exchange rate in advance. But for many small and medium-sized enterprises with meager profits, this has undoubtedly added new costs.

Guo Shaoxi, chairman of Guangdong Yiyu Craft Hardware and Electrical Appliances Factory Co., Ltd., which is preparing for next year's orders, said that next year will try to use bank hedging business. Many companies are reluctant to use hedging because the profits in this industry are too thin. If you make some money for the bank, you will have less left. But what can we do?& rdquo;

This year, Guo Shaoxi opened a branch factory in Jiangxi and opened more than a dozen processing sites in more remote mountainous areas of Guangdong to recruit more workers. However, he said: Although wages in the mainland are not as high as those in the coastal areas, management costs and transportation expenses are much higher. rdquo;

In order to minimize the impact of RMB exchange rate instability and fluctuations in foreign markets, many foreign trade companies have turned their attention to the domestic market. Xu Songhui, who has been producing Santa Claus for more than 30 years, began to use these techniques to produce China dolls: a wealth-spreading boy with China characteristics. Although it is still a small share of production, Xu Songhui hopes to gradually open up the domestic market with Spring Festival jewelry and walk on two legs.

Confusion of transformation and upgrading

Guo Zhuocai, president of Chenghai Toys Association and chairman of Guangdong Huawei Toy Craft Co., Ltd., believes that the international market has recovered this year, but the ensuing increase in various costs has made it difficult for China manufacturing, which is located at the low end of the industrial chain, to share the joy of market recovery.

Upgrading and transformation seems to be an inevitable choice for China's foreign trade companies. Xue Meng said that many toy companies are currently struggling to maintain, but there are also a considerable number of companies who rely on independent innovation, creating their own brands, and increasing the added value of their products to find new paths.

Some toy companies in Chenghai have begun to promote to the high end of the industrial chain, constantly introducing novel and multi-level products, increasing the technical content of their products, and shifting from making plush toys alone to developing electric toys and pet toys. Guangdong Aofei Animation Culture Co., Ltd. uses the animation + toys model to expand the market. In 2009, Aofei Animation became the first animation and toy company in China to be listed on the A-share market.

Yang Yusheng, administrative manager of Guangdong Aofei Animation Culture Co., Ltd., said that Aofei has moved away from original toy production and turned to independent research and development of four-wheel drive vehicles and Youyou balls, and cooperated with the production of cartoons to develop the entire animation derivatives industry chain to expand profit margins.

However, upgrading and transformation is not an easy task for traditional toy companies. On the one hand, it is the gradual compression of profit margins and the intensification of fierce market competition. On the other hand, it is to solve the objective pressure of labor employment. Traditional labor-intensive enterprises are caught in the middle and struggling to find a way out.

Guo Shaoxi, who has been in the Christmas gift industry for more than 20 years, said: Foreigners have to celebrate Christmas, and there is still a lot of potential demand in the Christmas toy market. So many rural laborers in China still have to solve the problem of food, but this industry is becoming more and more risky. rdquo; Guo Shaoxi said that he really wanted to close the factory, but what about the workers who had been with him for more than ten years?