Hong Kong toy manufacturers have experienced that the production cost had significantly increased in recent years, as revealed by industry experts.

With funding from the Hong Kong Trade and Industry Department's SME Development Fund, Federation of Hong Kong Industries, Hong Kong Toys Council and The Toys Manufacturers' Association of Hong Kong jointly organized Seminar: Sustainable Business Practice in Toy Industry to Provide Appropriate Choices for Buyers on 27 July 2009. One of the distinguished speakers, Vice Chairman of Blue Box Holdings Ltd. C. K. Yeung discussed the various hidden costs in toy manufacturing and the impacts.

Laboratory Testing and Factory Auditing Expenses

From 2006 to 2009, the overall expenses on laboratory testing and factory auditing have sky-rocketed ten times, or over 1,000%. This is largely due to a series of toy recalls in the United States and other countries, which as a result gave rise to more stringent safety control. Such expenses are estimated to make up at least 1.5 percent of the annual production cost in 2009, which is a proportion that manufacturers should not ignore. As more legislations and requirements related to factory and safety are expected, it is anticipated that there will be more substantial increase in 2010.

Labour Cost

Figure A: Minimum monthly wage in Shenzhen and Dongguan, China in 2006 - 2009

In the last decade (2001 – 2009), the minimum wages in Shenzhen and Dongguan have surged by 71 percent. As shown in the figure A, the minimum monthly wage in Shenzhen raised by 23.5 percent, from RMB 810 in 2006 to RMB 1,000 in 2009; in Dongguan it was up 34.1 percent, from RMB 574 to RMB 770.

In fact, the actual monthly earning of a worker includes overtime pay, which is calculated based on 26 working days, or 286 working hours. Thus the actual amount roughly doubles the minimum pay.

In addition to the basic wages, the social security system in China imposes extra charges. This consists of expenses for pension, medical services, industrial injury, unemployment and birth planning scheme. In Shenzhen and Dongguan (Figure B), such extra expenditure makes up 11.2 percent and 9.55 percent out of the total spending on wages respectively.

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