Think again.

Shoestring Venture deals extensively with offshoring manufacturing to China and I’ve done a fair amount of consulting with companies big and small (even one-person companies) who have manufactured toys in China. As you might imagine, Chinese toy manufacturers have taken a pretty hard hit this year what with lead-contaminated Thomas the Tank Engines and other kid poison traps. But the situation is actually much worse for Chinese manufacturers as we find out today in The China Perspective. Money quote:

the problem facing toy makers was that the orders typically placed with them will make them lose money if filled, while profitable orders were rarely seen. “So, the more orders they get, the more money they will lose,” he said.

Industry watchers said Chinese toy makers cannot pass on rising costs to buyers because of fiercer competition. Raw material costs for toy making have grown 60% this year, well below the 10% increase in prices for finished products. Mr Sun, general manager of a fluffy toy maker in Zibo, Shandong province, said the company could barely beat its breakeven point.

Expect small businesses and entrepreneurs to get worse deals from Chinese manufacturers in general, not just in toy manufacturing.

This entry was posted on Wednesday, January 7th, 2009 at 11:33 PM and is filed under tip sheet. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.