INDUSTRIAL OVERVIEW

Hong Kong has established a worldwide reputation in the toy industry for its production and re-export of a wide range of well-designed and high-quality toys. From the source of Census & Statistics Department, HKSAR Government, the total toys exports from Hong Kong in 2005 amounted to approximately HK$79,039 million with a modest 2.9% increase over last year. Recently, a local PRC press claimed that more than 70% of world's toys output value were made by more than 8,000 PRC manufacturers in 2005. Meanwhile, almost all the toys export from Hong Kong were re-export trade for the goods made in PRC.
A large proportion of Hong Kong toy exports are derived from licensing and contract manufacturing for overseas manufacturers. Production specifications and product designs are usually provided by customers. This type of arrangement is used to minimise the local manufacturers?risks to invest in product design, inventory taking and marketing. However, Hong Kong manufacturers are increasingly offering expertise in design, engineering, modelling, tooling, quality control and other technical know-how to its customers in order to maintain their close relationship with large buyers and to keep abreast of market trend.

Industry Trend

Nowadays, in order to enhance its competitive edge and bargaining power against other countries, Hong Kong toys manufacturers have been actively seeking low-cost offshore production facilities not only in the PRC but also in other low production cost countries such as Vietnam, Indonesia, Malaysia, the Philippines and Thailand. Hong Kong toys manufacturers have been striving to diversify their exports into emerging markets such as Latin America, Eastern Europe, the Middle East, Russia, India. Of course, the vast Chinese Mainland where the burgeoning market of international branded high quality toys was found promising for Hong Kong based manufacturer to leverage on the Closer Economic Partnership Arrangement CEPA advantages.

As a result, Hong Kong toys manufacturers have to differentiate themselves from their Mainland counterparts by shifting from OEM towards ODM and OBM focusing on unrivaled new material exploration, state-of-arts manufacturing technology, trendy product design, impeccable quality control, international brand building, world-class promotion & marketing, and global supply chain production management to cater for the need of the targeted customers.

Hong Kong and the PRC are major players for plush stuffed toys. Hong Kong has other well-established supporting industries such as electronics, plastics, textiles and clothing industries so that the quality in each toy segment can be improved and controlled since accessories in toys are well produced.

After China entered WTO, its continuous strong economic growth inevitably triggers the escalating commodity prices and rising labour cost. Together with the unification of corporate tax rate for local and foreign enterprises, the corporate income tax rate for foreign investors will be increased to 25% starting from 1 January 2008. In the coming years, Hong Kong toys manufacturers and traders need to face various challenges. It all depends on how good and quick a resourceful and tactful Hong Kong manufacturers to exploit its comparative advantage to turn all those challenges into new business opportunities.