For Chinese toy producers, this August was a true nightmare, as tens of millions of Chinese-made toys were recalled by foreign companies. With this move, the made-in-China products have once again been thrust into the world spotlight.  After analyzing the situation, experts pointed to trade barriers as the main source of conflict.

On August 2, Mattel Inc., (Mattel) an American toy company, announced a recall of 967,000 products made by Dali Toy Limited Company (Dali), an original equipment manufacturer (OEM) located in southeast China's Guangdong Province.  Mattel announced that paint on the toys contained excessive amounts of lead, and was potentially poisonous for children. Consequently, Dali would suffer a devastating loss US$30 million.

On August 11, the CEO of Dali, Zhang Shuhong, a businessman from Hong Kong, committed suicide.  His tragic death shocked the country and contributed to the collapse of Dali.

Three days later, Mattel shocked insiders when it decided to recall 21.8 million Chinese-made toys from the global market on the grounds that their magnets are liable to fall off, posing a potential danger to children. This is the largest recall in the company's history, and has made the safety of Chinese toys a worldwide concern.

On August 21, Wang Luxia, the spokesperson for Mattel, explained that the recall was a self-initiated action, not targeted against any third party. Wang went on to say that while the recalled toys met many countries' quality standards, Mattel had raised the bar for quality monitoring and thus decided to recall the products that could not meet the new safety standards.

It has been recorded that as early as 2006, Mattel discovered the toys' magnets were prone to detachment, but the company postponed the recall until this year.  Some toy industry insiders accused Mattel of deliberately exaggerating the safety problems of Chinese-made toys and said that in essence, the recalls were part of a trade war.

Wang refuted the charge, saying that the August 2 and August 14 recalls have no connection at all and the decision was made for children's safety rather than to set a trade barrier.

Yin Tao, director of the Industrial Economy and Corporate Management Research Institute under the Guangzhou Academy of Social Sciences, argues that the US has unfairly put China in a very unfavorable position by constantly raising the market-access standards and recalling Chinese-made products. He believes that the US is performing an act of economic hegemony by using its economic supremacy to set rigid technical barriers for developing countries. He suggests China should firmly hold its ground to fight against the recalls, explaining that the country should not worry because such product recalls are a very common occurrence in the global market.

Li Zhuoming, deputy executive director for the Guangzhou Toy Association, commented that Dali should not be the only one blamed for the recall.  Mattel should also assume responsibility because it failed to do a thorough job of quality examination before buying the toys, he said. Chinese OEMs make 80 percent of the toy exports to the US based solely on the design requirements set by importers. Therefore, the US side cannot avoid responsibility if any problems occur with the toys, he added.

Li also agreed that the safety problem of made-in-China toys has been deliberately exaggerated, and is confident about the quality of the toys made in Guangdong.  According to Li, there are more than 5,000 toy-manufacturing enterprises in the province, offering job opportunities to about 1.5 million people. Last year, these companies had gross production values totaling 121.9 billion yuan. Li said the latest recalls would not influence the development of the toy industry as a whole nor consumer confidence.

In addition, Li complained that with toy production costs increasing, foreign purchasers are trying to bring down the purchasing prices rather than raise them, making it impossible for Chinese manufacturers to make high-quality toys on such a shoestring budget.

Therefore, Zhang Shuhua, deputy director of the Industrial Economy and Corporate Management Research Institute, said the Chinese toy industry should build a uniform price-fixing mechanism to ensure margins as well as enough expenses for standard raw materials and production procedures. She also advised toy companies to obtain insurance to cut possible risk-generated losses.

Additionally, these experts say that all toy makers should enhance their quality management by strictly examining the raw materials, production procedures, and finished products. From the material purchasing to packaging, every step of production should meet standards.

Finally, and most importantly, the experts agree that the Chinese toy industry needs to create its own well-known brands, like American company Hasbro. Since the toy industry is currently mostly engaged in the processing trade, it can only make the products that have low added values and are labeled with foreign brands. With little competitive edge, the industry does not have much room to develop. Therefore, the Chinese toy industry should go through an innovation-oriented reform in order to protect long-term development.

(China.org.cn by Pang Li, September 5, 2007)