A promising market waiting to be tapped

Given that China has more than 235 million children aged below 14 years and the two-child policy is expected to help encourage more childbirths, China has to not only prompt domestic toy companies to expedite industrial upgrading, but also attract more investment from overseas.

Lego, for one, is upping the ante and half of its 160 newly added stores will be located in China, increasing the total number of its stores in the country to about 140 by the end of this year. Which to a large extent is prompted by its robust double-digit growth in the Chinese market amid relatively lackluster global sales.

Original equipment and original design manufacturing enterprises in the toy industry that rely on exports have begun to feel the pinch more strongly. According to Guangdong Toy Association, exports of toys registered a year-on-year growth of just 4.5 percent last year, compared with 31.2 percent in 2017.

Royalsound, a Chinese musical instrument and toy maker based in Zhejiang province, supplies toys to Lidl, a major German retailer that has strict quality criteria for toys, because of its manufacturing prowess and sound product quality. Yet it has seen no expansion since 2010 as the competition in the toy-making sector has been intensifying and the global toy market is losing steam.

"Since the margin in toy manufacturing is further narrowing, we have to strengthen the R&D of new products and put more efforts into self-branding to add more value to our toys," said Luo Youhang, board chairman of Royalsound. At the moment, the company is focusing on developing and promoting its own brands Musicube and Royalsound.

Last year, the Chinese toy market remains relatively vibrant and lucrative amid contracting sales in countries such as the United States, the United Kingdom and France. China raked in 70.48 billion yuan in retail sales in 2018, up 9 percent. Better still, 65.6 percent of Chinese consumers, according to China Toy and Juvenile Products Association, plan to increase their spending even as NPD Group, a global information company, said global toy sales declined by 2 percent last year.

However, in spite of a growth of 8.2 percent, Chinese parents on average spend only 299.5 yuan on a child aged between 0 and 14 - a mere fraction of the average 3,000 yuan in countries such as the UK and the US.