US toymaker swimming against the tide with new US$20 million China factory despite decoupling calls

Kids2, an Atlanta-based maker of toys and infant products, recently opened the first phase of a factory on the banks of the Yangtze River in central China

Pressure on US companies to reconsider investments in China reached a fever pitch during former president Donald Trump’s administration

4-MIN READ4-MIN

Chinese exports, after a short-lived drop in early 2020 during the country’s coronavirus lockdown, have climbed on a year-over-year basis for 12 straight months through May, including a record increase of nearly 155 per cent in February, according to China Customs data. Photo: Xinhua

Published: 12:00am, 3 Jul 2021Updated: 12:00am, 3 Jul 2021

Hammered by tariffs, coronavirus pandemic-fuelled disruptions and rising costs, some global manufacturers are reducing their reliance on Chinese factories and moving assembly lines to Vietnam, Malaysia and other lower-cost countries, or even Japan.

But Ryan Gunnigle, the chief executive of Kids2, is swimming against that tide. The Atlanta-based maker of toys and infant products recently opened the first phase of a factory on the banks of the Yangtze River in central China at a cost of US$20 million.

China’s dense supply networks, still-competitive labour costs, and growing domestic market proved too powerful a draw.

“If you’re making wood furniture, Indonesia is great,” Gunnigle said. “But for us, being central in China just outweighs any benefit of other markets.”

Gunnigle, who oversees a five-decade-old brand, has watched some suppliers and competitors set up shop in other countries – only to move back to China after finding the costs in their new locations were too high or having to deal with labour shortages and difficulties finding suppliers.

“There’s definitely a risk” in building a new factory in China, he said. “But our products have sewing, electronics, steel, plastic – and all those things come together well in China.”

For many US companies operating in China, the prospect of decamping to another Asian market was not a serious idea until 2018, when rising tensions between Washington and Beijing flared into a trade war marked by punitive tit-for-tat tariffs.