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China moves up the value chain
April 8, 2008
The future of the special relationship enjoyed by China and the toy industry for the last few decades seems to be ever more in question. Evidence for that can be found in an interesting article in The New York Times entitled: “Seeing the Sights of Industrial China: 2 Factories, 2 Futures.”
The article focuses on the clothing industry but the lesson for the toy industry is evident: China and Chinese manufacturers no longer want to be nor can be the bargain basement for the world’s consuming nations. The pressure on the Yuan to rise against the dollar, the increased pressure on factories to provide employees with better working conditions, and the desire to produce goods that are further up the value chain all conspire to make China a less hospitable place for the traditional toy industry.
This quote from the article written by Joe Nocera gives a strong flavor of what is happening:
When you travel around China these days and listen to businessmen and analysts, there is a phrase you hear again and again. They all talk about “moving up the value chain.” By that they mean they want their businesses to gravitate toward more complex, higher-value goods — the ones that bring in bigger profits, are less dependent on rock-bottom costs and are more immune to currency fluctuations.
Andrew Rothman, a China strategist with the investment firm CLSA, described it as “a deliberate policy to push manufacturing up the value chain.”
“It is coming at the same time as rising raw material costs. What the Chinese government is saying is that, ‘We don’t want to be the world’s workshop for junk. We want to make higher-value stuff that creates more wealth and better jobs.’ ”
In short, the Chinese would prefer to make cars, computer chips and iPods to making plush animals, action figures and toy trucks. Finding alternative locations and / or means of producing toys seems to be becoming an increasingly important issue. Are you moving or thinking of moving your production to another country? If so, where are you thinking of going?
Posted by Richard Gottlieb on April 8, 2008 | Comments (0)
