Toy Story

The crisis has already exacted a steep toll on those directly involved. The co-owner of the Hong Kong-based manufacturer responsible for the 1.5 million Fischer-Price lead-paint contaminated plastic toys committed suicide in the wake of the news, and his company has closed three factories and laid off 5,000 workers.

And while Mattel — all too aware of the importance of salvaging the reputation of its brand — responded to the scandal in a responsible manner by announcing plans to test every batch of toys shipped from overseas, the Chinese government by and large has not followed suit. Beijing’s first impulse was to lash out at foreign accusers, accusing them of China-bashing and protectionism.

As with most scandals, this one will eventually subside and things will go back to the way they were before — other than children perhaps finding fewer Mattel toys beneath the Christmas trees this December.

There is a plastics component to the scandal, though, in that the initial recall of 18.2 million magnetic play sets — which officials feared had the potential to come loose and be swallowed by children — were all made of plastic. And while it seems likely that the problem derived from a design flaw rather than a plastics manufacturing flaw, the episode is nevertheless instructive for the North American plastics industry, especially those plastics processors considering partnerships with or setting up operations in China.

The first point is the ongoing difficulty of Chinese manufacturing in meeting Western quality standards. There are numerous reasons for this, and most of us in the industry have heard them all before: corruption, poor labour conditions, widespread piracy and weak patent protection, all topped off by an immense and often dysfunctional bureaucracy. The result, by North American standards, is an almost lawless business frontier in which foreign plastics processors can fall prey to any number of costly traps.

This makes it all the more important for well-meaning North American companies to perform the necessary due diligence before either setting up their own shops in China or entering into partnerships with Chinese firms.

The second, and broader, point is that, in some ways, China itself is a contradiction. Seeking to create jobs quickly, Chinese manufacturers have assumed the role of the world’s subcontractor for low-priced consumer goods based on cheap labour costs. But the country’s rulers want China to be seen as something more — hence the manned space program, the rebirth of Shanghai as a glittering metropolis, and the securing of the 2008 Beijing Olympics.

At some point, this contradiction will have an indeterminate effect on business conditions in China, transforming them into something other than what they are now. Manufacturers considering doing business in China should keep this in mind.

Future issues of Canadian Plastics will more thoroughly explore such issues as understanding patent protection in China, and the ins and outs of establishing Chinese subsidiaries.

Mark Stephen, associate editor mstephen@canplastics.com