An industry official has been reported on Reuters as saying that Chinese authorities knew about safety problems with magnets on toys months before Mattel issued its massive recall.
The source - who asked not to be identified - said the issue with the toys was known back in March, but neither Mattel or the manufacturers were notified.
"We knew about the situation, because since March some toys had been recalled due to magnetic parts problems," said an official with the China Toy Association.
The body was due to meet with the Commerce Ministry and a quality watchdog on Wednesday to discuss solutions to the problem. However, Chinese authorities have admitted that it will take years to set up a proper inspection system to ensure products are safe.
Officials are looking at solutions such as having North American firms send their own inspectors to Chinese factories to ensure their standards are met. Some companies have also begun training Chinese inspectors.
Tuesday's recall by Mattel involved toys such as Polly Pocket and Batman action figures.