Recession cuts demand, 4,000 Chinese toy cos closed

More than 4,000 Chinese toy companies closed last year as the global recession cut demand and some countries tightened safety standards.

Toy exports rose 1.8 per cent in 2008, 18.5 percentage points less than the gain in 2007, the official Xinhua News Agency said on Saturday, citing a customs report.

China’s exporting collapse and the economic slowdown have cost the jobs of 20 million migrant workers, raising the risk of social unrest as the government rolls out a 4 trillion yuan ($585 billion) stimulus package to boost investment and consumption. Sacked workers rioted at a toy factory in Guangdong province in November.

“It is difficult for China to revive exports on its part, when consumption in major economies has stalled,” said Sherman Chan, a Sydney-based economist at Moody’s Economy.com. A “pressing need to avoid a surge in bankruptcies and unemployment” means the government should do more to tap domestic demand, she said.

Chen Xiwen, a senior rural planning official, warned this month of the risk of “mass incidents and social unrest” as jobless migrants return to the countryside. China is cutting export taxes to help manufacturers and has halted gains by the yuan against the dollar as demand dries up.

Mattel Inc, the world’s biggest toymaker, said this month that fourth-quarter profit plunged as consumers cut spending on Barbie dolls and Hot Wheels cars during the worst US holiday-shopping season in 40 years. Mattel imports from China.

Product-Safety Concerns: Forty-nine per cent of China’s export-oriented toy companies closed last year, leaving 4,388 of the businesses still functioning, Xinhua reported. Higher product-safety standards in some countries were also a barrier to sales, it said, citing the customs report.

India banned imports of Chinese toys for six months on 23 January this year for health reasons, Indian Commerce Minister Kamal Nath said on 6 February .

The US Congress last year passed the first overhaul of consumer protection laws in almost two decades after Chinese-made toys prompted safety concerns. Mattel recalled more than 21 million Chinese-made toys in 2007 because of excessive lead content.

China may ask the World Trade Organization to investigate the Indian ban as a possible breach of WTO rules, the official China Daily newspaper reported last week.