5 July 2019
China's Toy Market
I. Market Overview
Toys in the Chinese market can be classified broadly into electronic, mechanical, plastic and wooden toys. In addition to traditional offerings, models, licensed toys (including movie spin-offs, cartoon characters, etc), high-tech toys and educational toys (including ‘STEM’ – Science, Technology, Engineering and Mathematics – items) have continued to come onto the market.
According to data from market research company, Euromonitor, the total retail sales of toys and games in China soared from RMB135.6 billion in 2013 to RMB324.1 billion in 2018, an average annual growth rate of 19.1%. In 2018, retail sales of traditional toys and games increased by 7.1% year-on-year to RMB79.74 billion, representing 24.6% of total market turnover, while retail sales of electronic toys and games increased by 20.9% year-on-year to RMB244.31 billion, accounting for 75.4% of total market turnover.
As urban dwellers’ incomes rise and quality of life improves, toy demands are beginning to change. There is a shift away from traditional, medium- to low-end battery-operated toys, construction sets and decorative toys, towards innovative electronic and intelligent toys. According to the mainland toy consumer survey conducted by the Hong Kong Trade Development Council (HKTDC), both monthly household income and children’s ages have a positive correlation with the prices of toys purchased. As children grow older, the average price their parents pay for a toy also gets higher, as does the average price paid for the most expensive toy. This is possibly because, as they mature, children demand more from their preferred playthings.
As of 2017 there were around 233 million children under the age of 14 on the mainland, the year when China began the full implementation of the two-child policy under the 13th Five-Year Plan (2016-2020). The National Health and Family Planning Commission predicts that the number of new-borns will climb to between 17.5 million and 21 million annually during the period. This, along with China’s steady economic growth, should mean that toy market prospects are rosy.
High-tech electronic toys have become increasingly popular in recent years. Interactive, electronic toys with relatively high technology content have emerged as mainstream items. Another growth area is educational toys, inspiring children’s imagination and creativity and enhancing their coordination. Toys that combine learning and fun are well received by children and parents alike.
E-sports games have witnessed rapid growth in mainland China in recent years and their development has fuelled the growth of the electronic toys market. E-sports games are played using electronic devices, such as computers and video game consoles, with gameplay typically emphasising players trying to outwit rivals through move and countermove. At present, the total value of China’s e-sports market is RMB88 billion. Figures released by market research company, Newzoo, show that total revenue of the top 25 games distributors around the world was US$107.3 billion in 2018, with four such distributors mainland-based - Tencent, NetEase, 37Games and Perfect World.
According to Euromonitor data, children under six are the primary market for traditional toys and games, accounting for about 50.4% of retail sales. The percentage of children aged seven to 19 engaged with traditional toys and games, meanwhile, has dropped from 39% in 2017 to 36.6% in 2018. This is possibly because, over recent years, parents tend to buy educational toys rather than simple diversions.
Educational toys and toys that can help children learn are preferred by modern parents. In a survey conducted by HKTDC, almost half of all parents saw it as important that toys should help enhance their children’s intelligence. The huge attention paid to educational toys in recent years has led to robust sales of STEM items, including such new-tech as toys incorporating artificial intelligence (AI) and virtual reality (VR) toys. Overall, mainland parents consider STEM toys likely to boost their children’s learning and are willing to pay a premium price for them. In view of the massive market potential for innovative AI-led toys, the design of such items across the mainland has increasingly focused on incorporating smart elements.
Animation and Related Spin-offs
According to market estimation, nearly 80% of the world’s animation spin-off products are currently made in mainland China. Of these, nearly half are manufactured in Guangdong. A research report conducted by one mainland market research company, China Industry Research (www.cir.com), showed that the mainland animation spin-off industry is in robust shape, accounting for more than 70% of the whole animation industry’s profits. According to research by mainland consulting company ASKCI, the animation spin-off market in China was worth more than RMB55 billion in 2018,with animation toys accounting for the lion's share.
China’s 2018 toy imports breakdown:
|9503||Tricycles, scooters, pedal cars and similar wheeled toys; carriages; dolls; other toys: reduced-size (“scale”) models and similar recreational models working or not; puzzles of all kinds||648.6||16.2|
|9504||Articles for funfair, table or parlour games, including pintables, billiards, special tables for casino games and automatic bowling alley equipment||558.1||-20.0|
|9505||Festive, carnival or other entertainment articles, including conjuring tricks and novelty jokes||12.7||13.0|
Source: Global Trade Atlas
II. Market Competition
China is a major toy producer. An estimated 80% of all toys produced worldwide are made on the mainland. The primary toy production and export bases are Guangdong, Jiangsu, Shanghai, Shandong, Zhejiang and Fujian. Among these six, Guangdong is the leader, with manufacturing centred around Shenzhen, Dongguan, Guangzhou, Shantou’s Chenghai, and Foshan. The bulk of toy exports are produced for foreign brands on an OEM basis.
Although China has occupied an important position in toy production for many years, market pressures are increasing. As production costs on the mainland continue to rise many toy companies have opted to relocate production to other Asian markets, such as India or Vietnam, where wages are lower.
Toy enterprises on the mainland still lag behind foreign toy makers in terms of branding and innovative product design. In recent years, mainland enterprises have striven to stand out in the toy market through product differentiation, such as tapping into the highly popular educational toy sector.
In addition, due to such factors as declining external demand, escalating production costs and changes in the renminbi exchange rate, Chinese toy exporters are coming under tremendous pressure, with many enterprises increasingly looking to the domestic market for business opportunities.
Industry players on the mainland also maintain that the quality and safety of Chinese toys has been improving, with their price-performance ratio now comparable to those produced by foreign brands. In a survey by the HKTDC, product safety was ranked as the primary consideration when buying toys, while brand awareness appeared to be relatively less important.
While OEM production remains dominant in China’s toy industry, changes are taking place. Some Chinese toy makers are paying more attention to R&D, while a number of key enterprises with their own proprietary IPR and brand names have emerged, such as Auldey, Lanmao, Goodbaby, Dove and Huawei. In the Pearl River Delta region, toy enterprises have also embarked on transformation and are gradually shifting operations up the value chain, increasing efforts in sales and marketing and product development.
III. Sales Channels
Sales channels for toys include specialty stores in shopping centres, mainland online shopping platforms and supermarkets. According to a survey by the HKTDC, many parents think that physical stores provide better after-sale services. As a result, while online shopping platforms are more convenient and offer a large variety of product choices, physical stores are still the preferred retail channel for toys in mainland China. Currently, specialty stores and franchise chains, such as Edutainment, Hamleys and Kidsland have been expanding and have become a major toy-buying channel for parents.
Many toy brands have also made the move into e-commerce over recent years. Major online shopping channels include Tmall, Taobao, JD and Yihaodian. According to industry data, the total online sale of toys has soared by 30.9%, rising from RMB17.98 billion in 2017 to RMB23.54 billion in 2018. This shows that the mainland’s online toy shopping platforms are growing steadily, opening up more channels for toy retail. Meanwhile, products from foreign brands, such as Lego, Disney and Fisher Price, are now available via various major online platforms, highlighting their role as an effective channel for overseas players to tap into the Chinese market.
There are two main ways for foreign brands to break into the Chinese market – by appointing agents or by making a direct entry into the retail sector. The products offered by foreign toy makers often have high technology content, such as electronic toys, educational toys and game consoles, posing a clear challenge to the traditional toy market.
Selected China toy exhibitions 2019-2020:
|24-26 July 2019||Children, Baby, Maternity Expo (CBME)||National Exhibition and Convention Center (Shanghai)|
|16-18 October 2019||China International Toy Fair||Shanghai New International Expo Center|
|3-5 November 2019||Shenzhen International Maternity Baby Children Products Exhibition||Shenzhen Convention and Exhibition Center|
|6-8 March 2020||Shenzhen International Toy & Education Fair||Shenzhen World Exhibition and Convention Center|
|11-13 May 2020||Beijing International Kindergarten Supplies Exhibition||China International Exhibition Center|
IV. Import and Trade Regulations
China implements zero tariffs on toys from countries and regions enjoying the Most Favoured Nation status.
According to Chinese regulations, all products listed in the China Compulsory Certification (CCC) catalogue are subject to testing by designated testing and certification centres. Only products passing CCC certification and granted the CCC mark can be imported. The following six types of toys are subject to CCC certification: children’s vehicles, electronic toys, plastic toys, metal toys, projectile toys, and dolls.
Foreign companies venturing into the mainland toy market should be aware of the relevant standards in the industry. In the Standardisation Law of the People’s Republic of China, which took effect on 1 April 1989, four levels of standards are stipulated: national standards, industry standards, local standards and enterprise standards, in descending order of binding force.
National standards are classified into mandatory and recommended standards, represented respectively by standard codes GB and GB/T. For industry standards, there are likewise mandatory standards and recommended standards, with the toy industry deemed a light industry and represented by the standard codes QB and QB/T respectively. Local standards are mandatory within their respective administrative regions, while enterprise standards are applicable to the respective enterprises. For details of the standards, see www.standardcn.com and the Standardisation Administration of China (SAC) website.
On 1 December 2010, revisions were made to the CCC scheme implementation regulations on six types of toys, namely children’s vehicles, battery-operated toys, projectile toys, dolls, plastic toys and metal toys. The revisions further clarify the relevant technical requirements for these types of toys and shorten the time limit for certification. The CCC toy standards govern toys’ raw materials, as well as structural and circuit design in a bid to protect children’s safety. The above products which have not been certified or do not carry a certification mark are not allowed to leave the factory, be sold in, imported to, or used in other business activities in China.
The Measures for the Administration of Inspection and Supervision of Toy Imports and Exports (Revised) introduced on 23 November 2015 sets out provisions for supervision and management of the recall of defective import and export toys that may cause injuries to children. Export toys making a declaration for inspection for the first time must submit a test report issued by the test laboratory for import and export toys, as well as other documents, as required.
The National Technical Requirements for Toy Safety (GB 6675-2003), in force since 1 January 2016, contains four newly added mandatory national standards. Compared with the old standards, the four new requirements have the following three features: (1) the scope of application has been expanded to cover toys and materials designed for play by children aged under 14, as well as products not specifically designed as a toy but possessing features which can be played with by children aged under 14; (2) the requirements for safety indicators, including sound, mechanical parts and combustibility, have been tightened; (3) six plasticisers, including dibutyl phthalate (DBP), have been listed as restricted substances, with restrictions on the maximum quantities in line with those in EU standards.
To ensure the safety and quality of children’s toys and to protect children’s health and safety, the SAC has revised GB 6675-2003: National Technical Requirements for Toy Safety which was subsequently superseded and replaced by Parts 1 to 4 and 11 to 14 of GB 6675-2014: National Standard for Toy Safety. The requirements are mandatory and have been in force since 1 January 2016.
Determination of Total Lead Content in Materials of Toys and Children’s Products (GB/T 22788-2016) has been implemented since 1 July 2017 to replace the Determination of Total Lead Content in Surface Coating on Toys (GB/T 22788-2008). The new national standards revise the scope of applicability and include metallic and non-metallic materials in the determination of total lead content.
Under the Measures for the Administration of Inspection and Supervision of Toy Imports and Exports, in force from 6 March 2018, toy imports which have passed inspection are not required to affix the inspection and quarantine mark.
For the purpose of the Measures for the Administration of Inspection and Supervision of Toy Imports and Exports, as of 21 November 2018, the General Administration of Customs (GAC) has required original CCC certificates for the import of all toys listed in the Catalogue of Products Subject to Compulsory Product Certification. Previously, only a copy of the certificate was required.
In May 2019, the GAC announced a third revision to the Measures for the Administration of Inspection and Supervision of Toy Imports and Exports. This latest version designates the GAC as the governing body for the inspection and supervision of imported and exported toys. The GAC will now assume responsibility for the inspection and supervision of all imported and exported toys listed in the Catalogue of Import and Export Commodities Subject to Inspection, as well as those required to be inspected pursuant to the relevant laws and administrative regulations. Toy exports / imports not listed in the Catalogue, meanwhile, will remain subject to spot-checks in accordance with the prevailing GAC regulations.