VZCZCXRO8127
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #1226/01 3200847
ZNR UUUUU ZZH
R 160847Z NOV 07
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 6675
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEAUSA/DEPT OF HHS WASHDC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC

UNCLAS SECTION 01 OF 03 GUANGZHOU 001226 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS CONSUMER PRODUCTS SAFETY COMMISSION RICH O'BRIEN/INTL 
PROGRAMS 
STATE PASS USTR CHINA OFFICE 
STATE PASS HOMELAND SECURITY COUNCIL 
STATE PASS IMPORT SAFETY WORKING GROUP 
 
 
E.O. 12958: N/A 
TAGS: ETRD EIND TBIO ECON PGOV CH
SUBJECT: SAFETY ISSUES SHAKING UP TOY INDUSTRY IN SOUTH CHINA 
 
REF: GUANGZHOU 911 
 
(U) This document is sensitive but unclassified.  Please protect 
accordingly. Not for release outside U.S. government channels. Not 
for internet publication. 
 
¶1. (SBU) Summary: The toy industry in Guangdong Province is 
undergoing a major "shake-out" cruise as manufacturers seek to 
protect the integrity of their product, buyers express concerns, and 
government officials enforce regulations in the interests of 
maintaining the China "brand" name.  In Shantou and Jieyang, two 
eastern Guangdong cities that are centers of toy manufacturing, 
officials have closed almost 30 percent of local toy producers since 
July; orders from buyers have dropped sharply.  Local officials 
claim that training programs and more frequent inspections have been 
successful, asserting that there have been no safety-related recalls 
of toys made in area factories.  Companies remain concerned about 
"biased" foreign reporting with regard to product safety in south 
China; at times, they complain about the difficulty of figuring out 
how to meet differing international standards for products exported 
to multiple countries.  Some companies are eager to show their 
quality assurance procedures; they note that the emphasis on safety 
has enhanced quality and made them more competitive.  End summary. 
 
¶2. (U) Shantou and Jieyang in eastern Guangdong Province are 
important centers of toy manufacturing.  There are 78 registered toy 
manufacturers in Shantou, including 40 that export toys overseas. 
Local officials estimate that 8 percent of those toy exports are 
destined for the United States.  Jieyang has 26 registered toy 
producers with 18 companies licensed to export. 
 
Fewer Players, Fewer Orders 
--------------------------- 
 
¶3. (SBU) Product safety concerns have caused officials to shut down 
toy manufacturers with safety problems and have reduced orders from 
buyers.  In Shantou, national and provincial government agencies 
have closed 30 toy manufacturers out of 108 that were registered in 
July 2007 before the implementation of more stringent checks for toy 
safety and quality.  Officials in Jieyang blamed negative media 
coverage for a sharp decline in orders for local toy factories. 
They told us that Jieyang's toy industry had seen total orders fall 
by approximately 30 per cent from a year ago. 
 
Government Tightens Controls and Offers Training 
--------------------------------------------- --- 
 
¶4. (SBU) Shantou China Inspection and Quarantine (CIQ) officials 
told us that a series of new measures to improve toy safety 
standards in the area had ensured no safety-related problems in toys 
produced in the area.  The new measures include more frequent 
inspections with a specific focus on safety controls for paint and 
compilation of detailed files on the product quality performance for 
each manufacturer.  In addition, inspection agencies have also begun 
installing a sophisticated closed-circuit video monitoring system 
that will allow officials to monitor factories remotely. 
 
¶5. (SBU) Another important component of the enhanced safety regime 
is product safety training for toy makers.  CIQ officials confirmed 
that representatives of 8 local enterprises participated in a 
special training seminar for 400 Guangdong Province toy producers on 
October 15 in Dongguan City.  (Note: there likely will be more on 
training later this month when Vice Premier Wu Yi visits Guangzhou 
for a State Council Product Safety Conference.  End note.)  The 
training session was sponsored by China's General Administration of 
Quality Supervision, Inspection and Quarantine (AQSIQ) and the 
Ministry of Commerce (MOFCOM) in Beijing, and each geographic area 
of Guangdong Province was granted a number of seats for industry 
participants.  Local CIQ officials selected enterprises to 
participate and ensured that all slots were filled.  The 
high-profile event was widely covered in the media, but few details 
were provided at the time.  CIQ officials pointed out that the 
Dongguan seminar supplemented more frequent local sessions on toy 
quality standards and quality control procedures. 
 
¶6. (SBU) Despite signs of more effective enforcement of safety 
standards by local officials, overlap and a lack of coordination 
among local agencies involved in monitoring product quality 
 
GUANGZHOU 00001226  002 OF 003 
 
 
continues.  In addition to CIQ's controls for toy exports, the 
Technical Supervision Bureau (TSB) regulates toys produced for the 
domestic market.  In discussions with both agencies, it was clear 
that staff and laboratory resources are duplicated in each 
organization.  In addition, a joint meeting in Jieyang revealed that 
long-serving local CIQ and TSB officers had never met or worked 
together before. 
 
Strategies for Safety - Control, Design, Test 
--------------------------------------------- 
 
¶7. (SBU) Strict supply control, relying on internal design, and 
frequent random testing are common quality control strategies at toy 
factories in Shantou and Jieyang.  Chen Fengchang, the general 
manager of Goldlok Toy Manufacturing, told econoff that his firm 
used only imported paints to ensure safety.  Other materials are 
also subject to strict controls.  Chen explained that when the 
factory was opened in the 1980s, its Japanese customers sent 
employees to live and work at the factory for a few years to ensure 
quality standards were high.  Today the firm exports most of the 
action figures, models and radio-controlled toys it produces to 
Japan, Europe and the United States. 
 
¶8. (SBU) Jieyang Defa Toy Company executive Lu Jianwen emphasized 
strict supply controls to maintain traceability of paint and fabrics 
used in the production.  Lu only buys paints from a few select 
domestic suppliers, all of whom are specially certified.  In 
addition, the firm's contracts with paint and other suppliers 
include penalties if materials supplied do not meet specific quality 
standards.  Jeiyang Defa Toy Company primarily exports plastic 
Barbie-like dolls to Europe and Russia under its own brand name. 
 
¶9. (SBU) Auldey Toy Company's general manager highlighted reliance 
on internal design as the key to preventing safety and quality 
problems with the firm's toys.  The company holds over 1000 patents 
on its toys and produces no original equipment manufacturing (OEM) 
products under contract for other toy companies.  Auldey Toy Company 
is one of two "famous brands" in the Shantou toy industry, producing 
approximately 1000 different toy lines ranging from infant toys to 
four-wheel drive motor cars and yo-yos.  The factory is one of the 
largest and most successful in the area, selling most of its toys on 
the domestic market. 
 
¶10. (U) In addition, executives at each company said they rely on 
frequent quality testing in their own labs, local government labs 
and at private laboratories such as SGS and Intertek when requested 
by customers.  Toy manufacturers said they passed the costs of 
private lab testing on to customers except when a problem was 
identified that the manufacturer should have prevented. 
 
Blaming Media and Mixed Standards 
--------------------------------- 
 
¶11. (SBU) Government and industry representatives echoed complaints 
we've heard before blaming both the media and the variation in 
international standards for product quality problems (reftel). 
Shantou CIQ officials said recent Philippine media reports had 
incorrectly blamed candy made in Shantou for making children sick 
despite ample proof that no quality problems existed.  They argued 
that biased foreign media coverage had spread China's product safety 
image problem beyond the United States and other developed markets. 
Several toy producers also suggested that the United Stats should 
harmonize safety standards with the European Union. 
 
Comment - Getting More Competitive 
---------------------------------- 
 
¶12. (SBU) Recent toy safety problems appear in some ways to have 
strengthened the competitiveness of eastern Guangdong's toy 
industry.  Executives at each firm seemed to believe that recent 
events had placed them in an advantageous position because they 
already met most quality guidelines prior to the negative publicity 
of recent toy recalls.  The local CIQ closing of almost 30 per cent 
of area toy producers and more frequent inspections have helped 
force local factories to conform to international quality standards. 
 With the drop in orders the remaining factories must compete more 
vigorously for sales. 
 
 
GUANGZHOU 00001226  003 OF 003 
 
 
GOLDBERG