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January, 2019 2:33 PM


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Trade war making life "hell" for Chinese toymakers

Trade war making life

The China-US trade war is weighing on a multitude of industries and economies at the start of 2019. and Chinese toymakers spoke up about their struggles as they prepared to take center stage at this week's Hong Kong Toys & Games Fair.

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11.01.2019 08:00 PM

The China-US trade war is weighing on a multitude of industries and economies at the start of 2019 and Chinese toymakers spoke up about their struggles as they prepared to take center stage at this week's Hong Kong Toys & Games Fair.

Toy manufacturers in China have yet to be directly affected by the long-running conflict between Washington and Beijing, as their products are not on the tariff list, but heightened tensions and growing uncertainty has already made it challenging for them to manage day-to-day business.

Many of these manufacturers were present at this year's Hong Kong Toys & Games Fair, a major annual fair that hosted more than 2,100 exhibitors from countries around the world. Hong Kong was once a thriving toymaking center and retains its heritage by hosting the event, though mainland China now dominates global toy manufacturing.

Johnny Sze, Director and Vice General Manager of educational toy producer Eastcolight, said that the trade war shaped this year's event in new and different ways, and more buyers from the US headed east to secure orders in bulk. The desire to lock in imports early is due to worries that toys may join the tariff list in the future, which could hit many companies’ bottom line.

"This year, we noticed that we actually have a lot more US customers coming here, which is quite unexpected," Sze said in an interview with CNBC’s Squawk Box this week. Around 90% of the toys sold in the US come from mainland China, so it makes sense that many Americans ventured to Hong Kong to prevent supply chain headaches in the coming months.

Other manufacturers in China have already seen trading opportunities with US-based companies fall through. Joe Yao, Head of Shantou Subotech Toys, said that he is currently going through "hell," as third parties are now less interested in buying his company's precision remote control vehicles due to the prospect of future tariffs.

Yao said that the US was Shantou Subotech Toys' biggest market, but the specter of worsening trade tensions could put that in jeopardy. Manufacturers are hoping that the world's two biggest economic players can make progress in talks before the end of their 90-day truce, but they are pursuing alternative options in the event of renewed hostilities.

Stanley Lo, Marketing Director for Shenzhen Cowins Intelligence Development, said that his company is considering leaving China and could move manufacturing to another country in Asia. He added: "I think about Vietnam." Lo is set to visit the country in 2019 to assess whether a move would be possible.

The general consensus among toy manufacturers appears to be that the trade war will rumble on for some time yet. "I don't think the trade war will go away; it is just a matter of what percentage of tariffs will be imposed on each other," Ding Youzhong, Deputy General Manager at Guangdong Shiji Technology said. "While we wait to see the outcome of the talks, production capacity will be cut by 30% this year compared with last year, and the number of drones we sold to the US is likely to drop 60% to about 300,000."

There are already tariffs on high-tech electronics, which were common among the sophisticated toys displayed at this week's fair. Sze said that these levies will put added pressure on key suppliers already struggling with rising wages and more stringent environmental rules. He added: "We are worried that they will close down, and our supply chain will have some problems."

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