Page 296 - 2018 White Paper on the Business Environment in China
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8 White Paper on the Business Environment in China
manufacturing processes. Given the maturity of the the company has built on its existing manufacturing
industry, however, foreign investors must be strategic presence in China. Whereas China was once seen as little
when entering the market to compete with established more than a manufacturing stop on the supply chain,
players (Koty). Practically all of the international toy its extraordinary economic and social development has
giants have established their own factories on the cemented its status as perhaps the most impressive toy
mainland or collaborated with local manufacturers to market on earth (Timms).
engage in production. Most of the major international
toy enterprises have also made their inroads into the Toys in the Chinese market can be classified broadly
mainland market by way of appointing sales agents or into electronic, mechanical, plastic and wooden toys. In
setting up their own marketing operations there (HKTDC). addition to traditional offerings, models, licensed toys,
dolls, high-tech toys, educational toys, internet-connected
According to data from market research company toys and toys for adults’ recreation and entertainment
Euromonitor, the total retail sales of toys and games have continued to come onto the market (HKTDC).
in China have soared from 71.7 billion yuan in 2010 Given the industry’s growth potential, the competition is
to 192.3 billion yuan in 2015, registering an average intense, both in term of cost and innovation. Traditionally,
annual growth rate of 21.8 percent and are expected to foreign brands dominate the higher end of the market,
exceed 300 billion yuan by 2019. According to research while domestic brands control the lower to middle end
data compiled by a mainland maternity-baby-children of the market. Electronic toys that are more interactive
website (baobei360), the average amount spent per child than traditional toys have strong growth potential. This
(under the age of 16) on toys is less than $30 in China. is true for both conventional toys, like action figures,
When compared to more than $200 in the U.S. and $150- as well as experimental products, such as virtual reality
plus in some countries in Europe and the Americas, this and intelligent toys (Koty). Educational toys like jigsaw
figure shows there is definite room for development puzzles, DIY toys and 3D construction sets are becoming
(HKTDC). China is the world’s largest toy manufacturer, the latest craze among parents and children. These
producing around 70 percent of the world’s supply. Total toys are marked by several common characteristics:
export value of toys reached $33.7 billion in 2016. Of this, innovative in design, highly interactive and carrying high
traditional toys, including dolls, puzzles, educational toys, technology content (HKTDC).
etc., were valued at $18.4 billion. Most of China’s exported
toys are produced by OEMs who manufacture for foreign Plush toys that depict cartoon characters are
brands (Koty). popular both among children and adults of all ages,
and are often used for decorative purposes. Although
Overall, there are more than 10,000 toy manufacturers homegrown Chinese cartoon characters are slowly
in China. Dezan Shira & Associates notes that China has gaining prominence, this sector is still dominated by
numerous toy industry clustered along its affluent east Japan and the U.S., and South Korea to a smaller extent.
coast. Guangdong Province alone produces over half of The popularity of foreign cartoon characters offers ample
the world’s toys, with the cities of Dongguan, Foshan, opportunities for licensing (Koty). According to the
Shantou, and Shenzhen leading the way. The city of Forward Industry Research Institute, the animation spin-
Jiaxing in Zhejiang Province has also emerged as a major off market in China is estimated to top 38 billion yuan
toy producer after Danish toy manufacturing giant, in 2015, with animation toys accounting for the lion’s
Lego, opened its first Asian plant there. The 160,000 share. Toy-animation crossover is gradually developing
square meter facilities will eventually employ some 1,200 as a profit-generating business model, with Ori-Princess
workers and produce 80 percent of Lego products to be and World Peacekeepers as some of the more popular
sold in Asia. (Koty). products (HKTDC). However, despite improvements in
IP protection, counterfeit products are still rife. Foreign
Lego’s success was never guaranteed – far from it. investors should therefore make concerted IP protection
It is testament to the company’s maturity that it has efforts when entering the market (Koty).
surpassed Hasbro as the world’s second largest toy maker
since entering the Chinese market. The Danish company Low cost manufacturing initially drove China’s toy
has gone so far as to cite China as a future “core market”. industry, but the emergence of a massive domestic
The importance of its operations there were reaffirmed consumer market has fostered its continued growth. As
in 2016, as profits rose by nine percent. Crucially, urban dwellers’ income rises and quality of life improves,
296
manufacturing processes. Given the maturity of the the company has built on its existing manufacturing
industry, however, foreign investors must be strategic presence in China. Whereas China was once seen as little
when entering the market to compete with established more than a manufacturing stop on the supply chain,
players (Koty). Practically all of the international toy its extraordinary economic and social development has
giants have established their own factories on the cemented its status as perhaps the most impressive toy
mainland or collaborated with local manufacturers to market on earth (Timms).
engage in production. Most of the major international
toy enterprises have also made their inroads into the Toys in the Chinese market can be classified broadly
mainland market by way of appointing sales agents or into electronic, mechanical, plastic and wooden toys. In
setting up their own marketing operations there (HKTDC). addition to traditional offerings, models, licensed toys,
dolls, high-tech toys, educational toys, internet-connected
According to data from market research company toys and toys for adults’ recreation and entertainment
Euromonitor, the total retail sales of toys and games have continued to come onto the market (HKTDC).
in China have soared from 71.7 billion yuan in 2010 Given the industry’s growth potential, the competition is
to 192.3 billion yuan in 2015, registering an average intense, both in term of cost and innovation. Traditionally,
annual growth rate of 21.8 percent and are expected to foreign brands dominate the higher end of the market,
exceed 300 billion yuan by 2019. According to research while domestic brands control the lower to middle end
data compiled by a mainland maternity-baby-children of the market. Electronic toys that are more interactive
website (baobei360), the average amount spent per child than traditional toys have strong growth potential. This
(under the age of 16) on toys is less than $30 in China. is true for both conventional toys, like action figures,
When compared to more than $200 in the U.S. and $150- as well as experimental products, such as virtual reality
plus in some countries in Europe and the Americas, this and intelligent toys (Koty). Educational toys like jigsaw
figure shows there is definite room for development puzzles, DIY toys and 3D construction sets are becoming
(HKTDC). China is the world’s largest toy manufacturer, the latest craze among parents and children. These
producing around 70 percent of the world’s supply. Total toys are marked by several common characteristics:
export value of toys reached $33.7 billion in 2016. Of this, innovative in design, highly interactive and carrying high
traditional toys, including dolls, puzzles, educational toys, technology content (HKTDC).
etc., were valued at $18.4 billion. Most of China’s exported
toys are produced by OEMs who manufacture for foreign Plush toys that depict cartoon characters are
brands (Koty). popular both among children and adults of all ages,
and are often used for decorative purposes. Although
Overall, there are more than 10,000 toy manufacturers homegrown Chinese cartoon characters are slowly
in China. Dezan Shira & Associates notes that China has gaining prominence, this sector is still dominated by
numerous toy industry clustered along its affluent east Japan and the U.S., and South Korea to a smaller extent.
coast. Guangdong Province alone produces over half of The popularity of foreign cartoon characters offers ample
the world’s toys, with the cities of Dongguan, Foshan, opportunities for licensing (Koty). According to the
Shantou, and Shenzhen leading the way. The city of Forward Industry Research Institute, the animation spin-
Jiaxing in Zhejiang Province has also emerged as a major off market in China is estimated to top 38 billion yuan
toy producer after Danish toy manufacturing giant, in 2015, with animation toys accounting for the lion’s
Lego, opened its first Asian plant there. The 160,000 share. Toy-animation crossover is gradually developing
square meter facilities will eventually employ some 1,200 as a profit-generating business model, with Ori-Princess
workers and produce 80 percent of Lego products to be and World Peacekeepers as some of the more popular
sold in Asia. (Koty). products (HKTDC). However, despite improvements in
IP protection, counterfeit products are still rife. Foreign
Lego’s success was never guaranteed – far from it. investors should therefore make concerted IP protection
It is testament to the company’s maturity that it has efforts when entering the market (Koty).
surpassed Hasbro as the world’s second largest toy maker
since entering the Chinese market. The Danish company Low cost manufacturing initially drove China’s toy
has gone so far as to cite China as a future “core market”. industry, but the emergence of a massive domestic
The importance of its operations there were reaffirmed consumer market has fostered its continued growth. As
in 2016, as profits rose by nine percent. Crucially, urban dwellers’ income rises and quality of life improves,
296
