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Unbelievable: Toy Exports Out Of China Up 20% In 2007!!
By Paul Midler | January 6, 2008
Toy exports out of China were up last year - big time. The country exported US$7bn in the first ten months, which represents a 20% increase over the same period in 2006! Not only were exports up by that much, but the growth rate for the period was 14% higher, as well. It seems that recalls actually helped the situation - can that be possible? In case you’re wondering, by the way, the United States market saw an uptick of 13% during the period, and the European Union saw growth of 30%. The two markets together account for 68% of all toy exports out of China.
Do the glowing statistics mean that Mattel need not have bothered with that kowtow in Beijing then?
I have been trying to think of a logical explanation for these export statistics, and one possibility comes to mind: China held back a great many defective toys, went about producing their replacements, and in the end they exported the good along with a significant portion of the bad.
I received an e-mail - actually, a Facebook invite - from a reader who wanted to point out the dearth of media coverage related to the destruction of recalled toys. Only out of Mexico have we seen any good story: The Mexicans made a show destroying 175,000 toys. Where untold millions of defects wound up this season is really anyone’s guess.
Explanations welcome…
Topics: China |
January 6th, 2008 at 8:51 am
Paul,
What was our source for this, and more importantly what were the volumn numbers?
In my mind, there are a few explainations:
1) RMB has changed significantly over last 12 months, and some (maybe not all) will be reflected in the value of exports
2) Raw material prices have gone up, so perhaps some of the factories are charging more. Again, not a sign that the physical numbers have gone up, but the values have changed.
3) Reduction in VAT rebate may have lead to increase in recorded value as well
Anyway, not saying shipments were not up, but I would like to see what the volumes were as there are a lot of variables that could be skewing the value figures.
January 6th, 2008 at 9:02 am
All Roads -
Here is a link:
http://english.people.com.cn/90001/90776/90884/6333010.html
Understand your comment about RMB appreciation and VAT reductions, but toys are not a necessity of life - i.e., demand is elastic - and external economic factors such as the ones you mention might have contributed to a dampening effect (net effect on demand might have been plus, or minus, but such factors can cut both ways).
The whole point of taking away the VAT and allowing the RMB to appreciate is to slow down the export machine, not to accelerate it.
January 6th, 2008 at 9:12 am
Here’s the Mexico story from Reuters…
http://www.reuters.com/article/domesticNews/idUSN2864307120071129
January 6th, 2008 at 10:31 am
Anyway, one would have expected that all of the noise related to recalls, the media hype and so on - it was expected to have the intended effect of cooling demand in this sector. This clearly did not happen…
January 6th, 2008 at 7:57 pm
Paul,
Fair enough.
Looking at the article, it looks as if the US only increased 11.2%, so if volume stayed the same the percentage increased could be explained by the increased real export cost brought about by RMB and VAT.
Where the really interesting growth came from was EU.. 30% increase.
Anyway, a couple hundred RMB at customs house would go a long way. I would be interested to see what classifications did the best
Hope all is well
R
January 20th, 2008 at 8:59 am
75% of the toy recalls were caused by designs, not by faulty production. The FACT caused Mattel to apologize.
January 20th, 2008 at 9:30 am
JX - That’s a ridiculous argument, like saying that gun violence doesn’t matter because more people die each year in household accidents!
I already addressed the “logic” of your point in an earlier entry:
http://thechinagame.com/2007/11/06/blame-game-china-says-mattel-is-85-at-fault/
January 21st, 2008 at 7:43 am
Paul, China (or rather the producers) is certainly at fault too. I don’t deny with that. My point is that Mattel wasn’t kowtowing, but rather it was taking responsibility of its own problems as well.