Only the game have high hopes for toys

The market for high quality porcelain dolls is heavily reliant on the lucrative U.S. market

By Craig Francis
CNN

(CNN) -- With China producing almost 70 percent of the world's toys, it comes as little surprise to find that Hong Kong, on the mainland's doorstep, is playing host to Asia's largest, and the world's third grandest, toy trade fair.

But all is not fun and games in Toytown.

Despite China's accession to the World Trade Organization, the toy industry bears more likeness to a run-down playground than a glistening new bike riding into the suburban sunset.

The cumulative effects of an economic slump from Argentina to Japan and an America under siege have hit the Asian toy manufacturing industry hard.

Normally a time for unbridled optimism, the opening address to the Hong Kong Toys and Games Fair 2002 set a relatively cautionary tone.

Edmund Young, chairman of toys advisory committee of the quasi-official Trade Development Council (TDC), said 2002 would be a better year because "the world trading environment will hopefully improve."

"The 911 attacks in the US have inevitably exacerbated the consumer confidence in the short run, but the negative impact is gradually subsiding and US economic growth is expected to recover by mid-2002," he said.

But with many economic pundits predicting another harsh year, it may be that the Game Over signal that has flashed up for 2001 does not herald a Highest Score award in 2002.

Pessimistic market

Cycle company director Adam Wong is hoping his collapsible bikes can ride out the storm

Participation from overseas exhibitors rose by near to 9.0 percent at this year's trade fair -- a seemingly encouraging statistic. That is until the philosophy of one toy maker based in Guangdong Province -- which provides 70 percent of China's total toy output -- is taken into account

"We are only here this year because business is so bad. Normally we have enough orders to satisfy our production schedule but the economy and September 11 have both contributed to a definite market slump," said the plastic toy specialist.

The glistening harbor view from Hong Kong's striking convention center belies the murky waters the toy industry is confronting.

Adam Wong, managing director of Komda Bicycles, echoed the sentiment of many stallholders who disagreed with the working title given to the trade fair's opening address -- 2002 A Better Year for Hong Kong Toy Exports.

"For us, mostly targeting the Japanese market and the U.S. and Europe, we have little to be optimistic about. There are not as many deals being done at the fair this year as in the past, and people placing orders are being very cautious" said Wong.

Wong's subsequent recital of the economic factors affecting his business -- shrinking Japanese yen, slowdowns in Europe and the U.S., global unemployment and failed Argentine economy -- were fired off by others at the fair with toy gun-like rapidity.

According to Wong and others, only the relatively small Australasian market offered any respite from the downward trend.

Healthy twist

But for toymakers for whom the United States and Europe represent about three quarters of the export market, Australasia's stability was the equivalent of receiving a tennis ball for your birthday when you expected a games console.

For Steele Chen -- whose $10 porcelain dolls from Nanching, China, eventually retail in the U.S. for up to $100 -- sales prospects hinge on those same factors that remain out of reach of himself and his life-like Victorian era dolls.

"People at the trade fair have been buying less than usual because of September 11. Asia and the Pacific are growing as export markets but Europe and America, the big ones, are quieter than usual," said Chen.

Behind the gloomy outlook, at least parents can take some comfort that their children may be indulging in healthier pursuits.

While toy and video game exports in China tumbled in 2001, exports of footballs, basketballs and volleyballs rose 10 percent.