86Industry participants do not expect intensecompetition from outside of <strong>the</strong> Chinese Mainlandor <strong>Hong</strong> <strong>Kong</strong> in <strong>the</strong> <strong>for</strong>eseeable future. Theyreason that India has too much red tape, notenough infrastructure, and a different mindsetthan <strong>the</strong> one that is needed to succeed in <strong>the</strong> toyindustry; Vietnam is a late entrant that has not yetaccumulated <strong>the</strong> technical skills to make a widerange of toys; Taiwan and Korea have alreadymoved to higher tech/higher value industries;Thailand and <strong>the</strong> Philippines lack political andeconomic stability or supply networks; andIndonesia, Bangladesh, and Sri Lanka would haveto start almost from scratch to build a presencein <strong>the</strong> toy sector. O<strong>the</strong>r locations that wereonce competitors have been beaten by lowerproduction costs in <strong>the</strong> Chinese Mainland andby logistics systems, often based in <strong>Hong</strong> <strong>Kong</strong>,that link production in China to global markets.Thus <strong>the</strong> expectation is that <strong>Hong</strong> <strong>Kong</strong> and <strong>Hong</strong><strong>Kong</strong> companies will continue to have a strongcompetitive position, though margins may comeincreasingly under threat.Basic Facts about <strong>the</strong> IndustryThe Gross Industrial Output (GIO) <strong>for</strong> <strong>Hong</strong> <strong>Kong</strong>was HK$151 million in 2008 <strong>for</strong> <strong>the</strong> “electricalappliances and houseware and electronic toys”sector which is <strong>the</strong> only industry line within <strong>the</strong> toysindustry <strong>for</strong> which recent data is publicly available.<strong>Hong</strong> <strong>Kong</strong> employment <strong>for</strong> electrical appliancesand houseware and electronic toys is low with 414persons employed at an estimated average annualwage of HK$99,729. Wages were approximately32 per cent of total costs. 162 Wages <strong>for</strong> electricalappliances and houseware and electronic toys in<strong>Hong</strong> <strong>Kong</strong> are five times those <strong>for</strong> <strong>the</strong> sector in162 <strong>Hong</strong> <strong>Kong</strong> Census and Statistics Department data on“Electrical appliances and houseware and electronic toys,”2009.163 <strong>Hong</strong> <strong>Kong</strong> Census and Statistics Department.China as a whole. This is likely explained by generalwage disparities between <strong>Hong</strong> <strong>Kong</strong> and Chinaand <strong>the</strong> employment of more senior staff in <strong>Hong</strong><strong>Kong</strong>.Exhibit 51. Average Monthly Wages <strong>for</strong> <strong>the</strong>Sector in RMBRegionAverage Monthly Wages<strong>Hong</strong> <strong>Kong</strong> 7,328YRD 1,567PRD 1,543China 1,585Sources: Foshan, Dongguan, Shenzhen, Huizhou, Taizhou (JS), Nantong,Shaoxing, and Jiaxing City Statistical Yearbooks, 2009, China StatisticalYearbook, 2009.Total exports of toys, baby carriages, games, andsporting goods from <strong>Hong</strong> <strong>Kong</strong> in 2009 wereHK$104.9 billion, or 4.2 per cent of <strong>Hong</strong> <strong>Kong</strong>’stotal exports. The US and <strong>the</strong> EU were <strong>the</strong> twobiggest markets <strong>for</strong> <strong>Hong</strong> <strong>Kong</strong>’s toy exports,accounting <strong>for</strong> 56 per cent of <strong>the</strong> total. Demand fellin both <strong>the</strong>se markets with <strong>the</strong> economic downturnthat began in late 2008. <strong>Hong</strong> <strong>Kong</strong>’s exports into<strong>the</strong> US fell by 28 per cent in 2009, and those to <strong>the</strong>European Union fell 10 per cent (Exhibit 52). Reexportsof toys, baby carriages, games, and sportinggoods from <strong>Hong</strong> <strong>Kong</strong> were HK$104.7 billionor 4.3 per cent of total re-exports (Exhibit 53).Export processing facilities in <strong>the</strong> Chinese Mainlandaccounted <strong>for</strong> HK$50.1 billion of this total (Exhibit54), while Chinese Mainland-based non-processingtrade companies accounted <strong>for</strong> a fur<strong>the</strong>r HK$29.4billion 163 , <strong>the</strong> balance of <strong>the</strong> re-exports being <strong>for</strong>toys from places o<strong>the</strong>r than Mainland China. Totaldomestic exports <strong>for</strong> this sector in 2009 wereHK$137 million, a 21 per cent decrease from <strong>the</strong>previous year.In 2009, imports of toys, baby carriages, games,and sporting goods to <strong>Hong</strong> <strong>Kong</strong> were HK$91.9billion, or 3.4 per cent of total imports. The ChineseMainland accounted <strong>for</strong> 83 per cent of <strong>the</strong> imports,followed by Japan, <strong>the</strong> United States, and Taiwan(Exhibit 55).
87Exhibit 52. Exports of Toys, Baby Carriages, Games, and Sporting Goods from <strong>Hong</strong> <strong>Kong</strong>,HK$ millionsDestination2007 2008 2009Value Y-o-Y Change Value Y-o-Y Change Value Y-o-Y ChangeWorld 109,924 20.8% 120,078 9.2% 104,914 -12.6%US 33,545 4.1% 34,402 2.6% 24,783 -28.0%EU 30,094 20.9% 37,402 24.3% 33,561 -10.3%Japan 9,257 -8.9% 8,254 -10.8% 9,063 9.8%Note: Trade category UN SITC rev.4 code 894 - baby carriages, toys, games, and sporting goods.Source: <strong>Hong</strong> <strong>Kong</strong> Census and Statistics Department.Exhibit 53. Toys, Baby Carriages, Games, and Sporting Goods Re-exported from <strong>Hong</strong> <strong>Kong</strong>,HK$ millions2007 2008 2009Total Value Y-o-Y Growth Value Y-o-Y Growth Value Y-o-Y GrowthWorld 109,711 20.9% 119,875 9.3% 104,756 -12.6%Source: <strong>Hong</strong> <strong>Kong</strong> Census and Statistics Department.Exhibit 54. Chinese Mainland Process Industry Toys, Baby Carriages, Games, and Sporting GoodsRe-exported from <strong>Hong</strong> <strong>Kong</strong>, HK$ millionsToys, Baby Carriages, Games, and Sporting Goods Re-export of Processing ProductsManufactured in <strong>the</strong> Chinese Mainland2006 2007 2008 2009Value 62,046 70,682 66,595 50,184Source: <strong>Hong</strong> <strong>Kong</strong> Census and Statistics Department.Exhibit 55. Imports of Toys, Baby Carriages, Games, and Sporting Goods to <strong>Hong</strong> <strong>Kong</strong>, HK$ millionsOrigin2007 2008 2009Value Y-o-Y Change Value Y-o-Y Change Value Y-o-Y ChangeWorld 95,651 21.2% 109,477 14.5% 91,980 -16.0%Chinese Mainland 74,940 27.7% 91,150 21.6% 76,334 -16.3%Japan 14,568 -6.4% 11,817 -18.9% 9,754 -17.5%US 1,822 49.8% 2,043 12.1% 1,675 -18.0%Taiwan 931 -7.8% 746 -19.9% 586 -21.4%Source: <strong>Hong</strong> <strong>Kong</strong> Census and Statistics Department.