China is the world’s leading toy manufacturer, with more than 10,000 manufacturing companies producing almost three-quarters of the world’s toys, generating exports of USD 46.12 billion in 2021. However, China’s role in international manufacturing is changing as trade struggles with the US continue, the country’s economic development makes labour more expensive, logistics costs are rising and supply chain disruptions reduce the efficiency of manufacturing in China and shipping globally.
The lion’s share of China’s toy exports, 29.2%, go to the US, followed by UK, 4.5%; and Japan, 3.9%; Mexico stands in seventh position, with a 3.1%. Other countries in Latin America like Brazil where 75.80% of toy imports come from China, and Ecuador, where Chinese imports account 78% of the country’s toy market, according to Ecuador’s central bank (BCE), continue to heavily rely on Chinese toy imports, but could this be about to change?
One driver behind China’s market share dominance is a lack of competition from domestic toy manufacturers who, in most countries, cannot meet consumer demand. But there are signs of change emerging: Brazil has experienced significant growth in domestic toy production following the COVID-19 pandemic, with 14% growth to revenues of USD 1.5 billion.
An economic adviser to Mexico’s Ministry of Economy thinks domestic toy production could start to increase, “Around 80% of toys in circulation in Mexico come from China but toy prices from China have increased due to rising inflation and increased logistics costs. We have some local brands that do well such as Mi Alegria and Distroller and Mattel produces here so we could do much better with the right investment.”
“Toy prices from China have increased due to rising inflation and increased logistics costs.”
Economic adviser, Ministry of Economy, Mexico
Mexico is increasingly positioning itself as a nearshoring manufacturing hub and this includes toys: earlier this year, Mattel announced a USD 50 million investment to expand its manufacturing plant in Nuevo León. With soaring shipping costs from distant countries, manufacturing centres in closer-to-home regions are becoming more attractive. Supply chain diversification and growing environmental concerns also predict a shift in manufacturing trends which may benefit Latin American countries over the next decade.
“Domestic toy production in Argentina accounts for something like 40% of the total with 60% imported and not only from China.”
Executive Toy manufacturer, Argentina
The domestic toy industry in Argentina is already quite strong and is set for further growth, explained an executive of a toy manufacturer, “Domestic toy production in Argentina accounts for something like 40% of the total with 60% imported and not only from China. The domestic toy industry in Argentina is very strong and competitive, so there is plenty of room for growth. Furthermore, many of the inputs used to make toys are produced domestically, such as polypropylene and polyethylene, although there is some fear that there may eventually be a shortage of others that are imported. Finally, domestically produced toy prices have increased below inflation, while everything bought from abroad has suffered a sharp increase as a result of the taxes that have been generated for purchases abroad.”