BEIJING — The European Union, the world’s second-largest toy market after the United States, has just implemented what it claims to be “the most stringent” set of regulations ever for the industry. Some fear that the so-called “Toy Safety Directive” could bring the toy industry in China, where 80% of the EU's toys originate, to its knees.

Zheng Guohui, a Hong Kong toy trader and one of the first to set foot in the economically booming Pearl River Delta — a major manufacturing base for toys and other products — is convinced that the new directive may mean life or death for many of the makers there.

Although the Pearl River Delta suffered huge losses during the 2008 financial crisis because of its export-led economy, it nevertheless remained stable as the market resized, Zheng says. But the new set of regulations involves changing the rules of game, a fundamental “industrial reshuffle,” he says. Zheng predicts that over the next two or three years “at least half of the current manufacturers are not going to pass the threshold.”

Compared to the last EU Toy Safety Directive, the new one has made significant modifications to product definition, safety performance, product conformity assessment and accountability, to say nothing of changing the rights of the various responsible parties. There are now 57 clauses instead of just 16, and it is unquestionably the world’s most demanding set of toy safety regulations.

For instance, the new directive strengthens the requirements about chemical and electrical safety performance. Heavy metal tests are now required for 19 items, instead of just eight, and there are 55 new prohibited substances and another 11 restricted ones.

Responding measures

China is by far the world’s biggest toy producer and exporter, accounting for two-thirds of global production. According to China’s National Bureau of Statistics, it exported $13.9 billion worth of toys in 2012. Of that, the EU accounts for $2.6 billion, or 18.7%, of its total toy export.

To help manufacturers deal with the new directive, Chinese authorities began offering, as early as 2011, 67 free counseling and coaching seminars to toy manufacturers in several of China’s primary manufacturing regions. Nearly 10,000 people have participated in these courses, according to Sun Hing, a staff member of the Dongguan Entry-Exit Inspection and Quarantine.

For a recent training session in Dongguan, the State Quality Inspection Administration invited experts to conduct a comprehensive interpretation of the new regulations. Explanations were given for three major areas, including chemical safety, mechanical and electrical safety and technical archive files.

The unavoidable reshuffle

“The new EU directive’s impact on the Pearl River Delta toy makers is manifold, notably in the examination of raw materials,” says Liang Xiongjie, brand director for Loong Run Toys Co., which owns three factories in the region. Dongguan is China's largest export base for toys, accounting for more than 20% of the total export. Almost all of the world’s famous toy brands have their original manufacturers here.

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Photo: Ian Holton

As Liang points out, the new directive enforces requirements on product material quality and categories, necessitating considerable increases in production processes and costs. Meanwhile, the original product data dealing with specification, appearance and raw materials are to be preserved for 10 years.

The headache for Chinese manufacturers is that, in the past, a single $1 million order very often had just one standard specification. But now, out of caution within the market, the commissioning merchants require the same size order be made in a dozen specifications, categories and colors.

The increasing mobility of workers is another worry for Chinese toy factories. While there are many assembly processes and complexities involved with the work, the industry offers relatively low pay compared to the electronics industry. And with the constant loss of skilled employees, it’s difficult to maintain a high level of productivity while simultaneously guaranteeing technical requirements and quality.

Survival of the fittest

There are, however, certain enterprises that regard the new regulations as a sort of challenge to enhance their own strength among the competition.

For example, Ru Dezhong, manager ofSieper Hardware & Plastic — a German-owned company producing mainly plastic alloy toys in Dongguan — believes that “despite the 5% or so cost increase, the implementation of the new directive is a big plus for enterprises.”

Ru is convinced that the new directive was a result of the global economic crisis and the European Union's way of creating a technical barrier to prevent the loss of toy industry manufacturing jobs at home.

“Were a manufacturer able to break through this barrier, it means the firm’s competitiveness is at the high-end of the global market, whereas the ones that can’t adapt themselves to the standards are in the manufacturing downstream,” Ru says. “There’s no point in just complaining. The manufacturers must effectively improve their competitiveness and go toward the high end of the industrial chain to obtain long-term profits as well as economic and social effects through high efficiency and quality.”