Hong Kong toy makers plan to boost sales in the mainland to make up for lost exports as stalling economic growth in the US and Europe dampens demand, according to a survey.

The survey, jointly conducted by the Federation of Hong Kong Industries, the Hong Kong Toys Council and The Toys Manufacturers' Association of Hong Kong, interviewed 149 Hong Kong toy manufacturers from mid-November to mid-December. Among them, 80 percent are "original equipment manufacturers (OEM)", while more than 90 percent undertake production in the mainland.

Faced with shrinking demand from the US and the eurozone and concerned about their fragile economies, nearly half of those surveyed reckoned that they will seek to increase sales on the mainland and will depend on it to generate a higher proportion of their total turnover. Approximately 30 percent expected their mainland sales to grow 5 percent or more in the future.

Around 68 percent of them saw "exploring the mainland market as a new way out for the Hong Kong toy industry," said Yeung Chi-Kong at a media briefing Thursday. Yeung is the project leader of "Creativity and Toy Culture of Hong Kong", the city's largest exhibition on toy culture that will last until March next year.

"Currently, the total sales volume of toys on the mainland is far behind that of the United States. We see a great potential for the market and we are expecting double-digit growth in the future," said Bernie Ting, chairman of Hong Kong Toys Council.

Hong Kong toy makers took 25 percent share of the mainland market during the first nine months of the year, with sales there inching up 2 percent from 2010.

But toy exports have painted a gloomier picture. Yeung estimated that toy exports, a major contributor to Hong Kong toy makers' income, will have dipped by several percentage points this year from 2010 though total toy sales will likely have remained flat compared with last year.

That is in line with the rest of the export sector. The city saw its total exports slip 3 percent in September by value, the first drop in value in almost two years.The decline was 10.9 percent in volume terms. Export volume gained 4 percent in October.

About 62 percent of those who responded to the latest survey reported worse turnover in 2011 from a year ago, while 57 percent expected business performance to be even worse in the year ahead. Besides weak exports, soaring raw material prices and climbing wages also take the blame, according to Yeung.

As margins become thinner, adding more value to the products is obviously the other route that Hong Kong toy makers should follow to keep their competitive edge, the survey said.More than half of respondents considered transformation from OEM to "original design manufacturing (ODM)" inevitable, with 20 percent saying they will recruit design staff in Hong Kong in the coming year.

emmaan@chinadailyhk.com

China Daily

(HK Edition 12/16/2011 page2)