The mainland's toy manufacturing industry has had a wild and profitable ride on the back of its low costs and insatiable overseas demand, but the golden years have passed. The industry is gradually being crushed under ever-increasing costs and more recently was rocked by the recall of millions of toys in the United States because of quality and safety concerns. Nevertheless, the industry has been good to migrant worker Ran Zengqian and his boss, factory owner Peter Chai Kwong-wah, even if dark clouds lie on the horizon. Mr Ran, a slim, dark man in his 40s, has spent more than a decade as a sewing worker in Mr Chai's toy factory in Longgang , Shenzhen, home to hundreds of toy plants that export overseas. As a young couple in 1994, Mr Ran and his wife left their children behind in their home town in Sichuan to join Milliard Toys Manufacturer. Now he earns at least 2,000 yuan a month, double the city's minimum wage in the high season, from June to October, working from 8am to 9pm. The job involves sewing hundreds of pieces of cloth together to make toy bears, lions and Hello Kitty dolls destined for export to Japan, the US and Europe. Many migrant workers in his age group worry about their job security when they see young workers flocking to the city. And now they worry even more as the industry trembles amid the shockwaves of June's first toy-recall earthquake, which has already cost the life of a Hong Kong company boss, who committed suicide, and the jobs of his 3,000 workers. But as media speculate pessimistically about more recalls and workers anxiety levels remain high, Mr Ran and Mr Chai are not worried. 'Finding a job in toy factories here is a piece of cake,' Mr Ran said. 'If I quit this morning I could get another offer in the afternoon.' Mr Chai said: 'Very few countries can do what we do. The multinational toy importers know there is nowhere else they can get as good or better a price/performance ratio as Guangdong's factories, even though there are also individual quality issues here. I'm sure the US companies will keep importing China's toys at the same time as they loudly criticise safety problems.' He has seen no drop in the number of new orders, but Mr Chai admits the industry's best times are over because of labour shortages, the rising price of raw materials and new standards set by importers. 'It was much easier for Hong Kong firms to make money on the mainland 10 years ago,' he said. In the past two decades, more than 90,000 export processing firms have been operating on the mainland, nearly 70,000 of them in Guangdong. Of those, about 57,500 owe their existence to investment from Hong Kong and employ 9.6 million workers, according to the National Bureau of Statistics. 'When I first came to invest in Longgang in 1993, farmland surrounded my plants. Labour and raw materials were cheap and government officials from all levels were happy to help Hong Kong-invested factories,' said Mr Chai, a Hongkonger. 'Now everything costs more - except the US importers want to pay less than before.' Because of the rising costs and US reluctance to pay more, Mr Chai now prefers to do business with Japan and Europe. 'Japan's importers usually have stricter quality standards than US importers, but most of them will also pay us better than the Americans. I can make about 20 per cent gross profit on orders from Japan and Europe, but only 12 per cent from the US,' he said. 'With such a small profit margin, some manufacturers may take risks and use cheap supplies to lower the cost. I think that partly explains why most recalls were by US importers.' Mr Chai says he has felt little impact from the recent recall scandals; his real headache is a lack of staff. 'I had to turn down some orders because I would have needed at least 700 workers to get all them done, but I only have 400 workers,' he said. Despite an increase of about 40 per cent in the minimum wage in Guangdong's major cities over the past two years, there is no sign of the labour shortage easing. There were 4.8 million job seekers for 7.3 million places in the province last year, with some 60 per cent of factories experiencing labour shortages, and the trend appears to be continuing this year. To maintain his core workforce, Mr Chai looks after his senior workers carefully. 'New, young employees often come this month and leave next month, but about 200 workers of mine have never quit. They have been working for me since the year I opened the factory. Now each of them could find a job easily in any toy factory. They have shown me great loyalty and I appreciate it. 'Salary, holidays and working conditions are surely the prerequisite to attract workers. But when all of these are almost the same, why do workers stay a long time at one factory? The relationship with the boss is the thing that counts.' Mr Ran wears two gold rings, on the middle and ring fingers of his right hand. His boss gave them to him as bonuses in 1997 and 1998 during the industry's peak time. 'I may forget how much money he has paid me over the years, but these rings remind us he is a good boss,' Mr Ran said. Mr Chai's appreciation of loyalty is not only expressed with gold rings. When the children of senior workers go to college, he helps each family out with a 2,000-yuan grant per academic year. And, in return for Mr Chai's concern for them, Mr Ran and his co-workers often bring him gifts of chickens, geese and even goats from their home towns. Mr Chai has erected a henhouse in the factory and keeps all the animals together. 'I won't eat any of them. They are presents,' Mr Chai said. 'Not every factory in Guangdong is a sweatshop. Only the dolls we make are forever young. My workers and I have been getting old here. We should treat each other well.' Mr Chai and Mr Ran think they might leave the industry soon because the future no longer looks bright. 'Now the net profit in the industry is only about 3 per cent. It may be worse next year if costs of raw materials and workers keep increasing ... I will close the factory if it cannot make enough money to stay afloat and pay the workers,' Mr Chai said Mr Ran said he would probably leave Guangdong in two or three years. 'Now my children have grown up and I'm not young any more. It will be time to go home soon.'
