SPIELWARENMESSE 2011: Manufacturing heading back to Europe? - ToyNews

SPIELWARENMESSE 2011: Manufacturing heading back to Europe?

Increasing Chinese factory pricing is making European production a viable option, say manufacturers at Nuremberg.
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An excellent report on German site Monsters and Critics says continental suppliers are finding that increasing Chinese manufacturing costs are forcing them to consider options nearer to home.

Rising wages in China are sending a jolt through the world toy industry, prompting a revival of factory capacity in the West, companies at Spielwarenmesse are saying.

Inflation in China is driving up both wages and factory- gate prices. Officially, Chinese inflation is running at five per cent for consumers, but the true figure seems higher. The Renminbi exchange rate is up, and China's supply of cheap labour is running out.

Retail toy prices in Europe seem likely to jump as much as 30 per cent this year, and suppliers are saying conditions in China are a major reason for that.

German companies say Chinese prices are are getting steeper, and some believe that manufacturing in Europe is now affordable by comparison. European inflation and pay are flat.

"Workers are leaving to move over to higher-value manufacturing," says Martin Boeckling, boss of German firm, Spiel und Spass. He says Beijing no longer recognises toys as a priority manufacturing sector.

Although an estimated two-thirds of toys sold worldwide are Chinese made, the sector contributes only 1.5 per cent of China's gross domestic product.

Beijing has decided that its available labour resources need to be redirected into manufacturing types that add more value, including cars and electronics.

China is leaving the low-profit toy business behind and there is no obvious successor in the low-wage countries.

In centralised fashion, Beijing would also like to spread factories back to the places where Chinese people live, and reduce the vast migrations by China's job nomads at times of festivities.

Reducing the concentration of manufacturing in the south would help stop some of the snarl-ups on China's roads and railways. The rebuilding of those same roads and railways is also sucking away labour.

Otto Umbach from Idee und Spiel, adds: "Chinese universities are graduating 6.5 million people per year. They don't want to work on factory assembly lines."

China, he forecasts, faces a shortage of unskilled manual labour. Toy factories will have to hike pay 10 per cent this year.

European importers might be able to absorb that, but not combined with a jump in the price of raw materials and the cost of sea- freight.

"At the start of 2009 you could land a shipping container in Europe from China for about 600 dollars," says Boecklin. "Today it's costing $1,400 or $1,500."

Several European companies are thinking of manufacturing closer to home.

Simba Dickie has set up a new factory in France and has modernised its German plants.

Paul Heinz Bruder, head of Bruder, has always manufactured in Europe. He believes the logistics of supplying European shops from European plants always made better sense and ensured quick order fulfilment. Safety and quality checking is also easier.

"Many companies you deal with in China are kind of fly by night," he says. "They don't have a prope mailing address. If something goes wrong, you have a real job on your hands finding who is responsible."

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