RECENT reports released from Hong Kong suggest hundreds of Hong Kong-owned toy factories in China may be forced to close after huge global recalls hit the industry.
The recent massive recalls in the US and Europe had prompted the Chinese government and foreign buyers to impose stringent quality checks.
Costs for quality control are said to have rocketed over 500% since the high-profile recalls began in June last year.
This, coupled with the rising cost of labour and raw materials amid surging oil prices, is expected to push total production costs in 2008 up by 15% year-on-year.
The reports suggest, hundreds of toy factories in China will find it difficult to withstand such pressures and could be forced to shut, although most of the victims would be small and medium-sized companies.
Over the past few months China has come under strong international pressure after millions of toys exported to the US and Europe proved to have dangerous defects.
Although the recalls have hurt the industry’s reputation, the sector recorded an increase of 3% in toy sales in 2007. The industry is cautiously optimistic that sales will increase this year.
China is the world’s top toy exporter, selling 22 billion toys overseas last year, or 60% of the globe’s total.