How a Chinese-Made Toy Reaches an American Retailer
As Christmas approaches, we follow children's toys from Chinese factories to US store shelves.
Hosted by Sam Fenwick - Chasing the Money: Business Daily
On the bottom of most children's toys available in the United States, you'll find the same three words "Made in China."
According to US government statistics, nearly eight out of 10 toys (78.3%) imported into the country in 2024 will be from China. foreigner
Trade figures show that toys imported from China were worth $9.8bn (£7.4bn) last year. foreigner
With Christmas just around the corner, the toy industry in the United States and elsewhere is experiencing its busiest time of the year yet.
As retailers prepare their stocks for the festive rush, be they online giants or mom-and-pop brick-and-mortar stores, BBC World Service's Follow the Money traces how a toy gets from a factory in China to the US. And where does the money go?
Guangdong province, which neighbors Hong Kong in southern China, is the heart of the country's toy industry.
In the city of Dongguan, workers on the Mihox factory floor remove plastic toys from steel molds and stack them in boxes ready for painting.
The company says it employs more than 800 people and produces about 55 million toys a year for the U.S. market, which accounts for half of its business.
Chasing the money: A $30 toy's journey from China to America
Each toy starts with a design from a customer, such as an American toy company. The factory then makes a prototype and makes molds from which the plastic parts and other components are formed.
Melanie Wang of Mihox's sales team says it takes one to two years to go from an initial idea to a finished toy. Much of it is about getting the customer back to the drawing board. They revised the design again, and again, and again to improve it."
Once the plan is signed, everything goes faster. It takes about a month to make a mold and it takes about three months to produce it.
So, how much of the US retail price does the factory charge? "About 20 percent," says Wang.
For a $30 toy, that's $6, which should cover the cost of plastic and other materials, production costs including wages, and factory profit.
Chinese factories typically make between 3 and 10 percent profit, according to Jay Foreman, chief executive of US toy company Basic Fun. So for a $30 toy that's between 60 and 18 cents of the $6 it costs the factory to make.
Samson Ko is the chairman of the Hong Kong Toy Manufacturers Association. Many of its members moved their factories across the border to mainland China in the 1980s, attracted by cheaper land and labor.
The way toys are made has hardly changed since then, he says. Automation is now mostly done in the molding and packaging process. But for soft toys, or even some electronics today, it's still very labor intensive.
After the recent increase, Chinese labor is no longer cheap, he adds.
A foreign report earlier this year said the average wage in Vietnam is about half that in China.
However, fewer than 10 percent of Ku members have moved any production outside of China, and in these cases, it's mostly because customers have asked them to.
Chinese factories remain busy, he says, because a toy can go through more than one production process, from molding parts to adding electronics, sewing materials and final assembly. This often requires traveling to different factories.
Ku adds that in Guangdong these separate facilities are close together and used to "work in harmony". This makes the whole production process smoother than in other countries, he says.
From the factory, the toy goes by truck to a port like Shenzhen, Guangdong's biggest port.
Ivy Tse is the co-founder of FreightAmigo, a Hong Kong logistics company that operates an online platform for Hong Kong and Mainland China exporters. These businesses can book a cargo container, sea passage to an overseas destination, arrange insurance coverage and secure financing.
It takes about 15 days for a cargo ship from Shenzhen to reach the West Coast of the United States and 25 to 30 days to reach the East Coast, Tse says. This year's Christmas toys left China in August and September.
Shipping from the factory to the United States typically adds about 10 percent to the cost of producing a toy, adds Tse. So if we take a toy that sells for $30 in the US and therefore costs $6 to make in China, it costs 60 cents to ship it to the states.
There is currently a tariff on Chinese toys that must be paid to US Customs and Border Protection (CBP) when the toy arrives in the US.
After talks last month between President Trump and Chinese leader Xi Jinping, the two governments recommended the toys for lower tariffs. But no new rates or start dates have been set, and the US must first hold a public consultation. Currently the base rate is 12.5% and some toys pay more.
This fee is calculated based on the manufacturing cost of the toy, not its retail price. So for a $30 toy, that base rate is 12.5% of $6, which is 75 cents.
This tariff is paid by the American company importing the toys. One such company is Learning Resources, a family business based near Chicago that sells educational toys. It imports half of them from China.
"We pay 100 percent of the tariffs, let there be no doubt about that," says Rick Voldenberg, the company's chief executive.
The cost of making a $30 toy, shipping it to America, and paying the import tariff comes to $7.35. So that leaves $22.65 or 75.5% of the total.
That money never leaves the United States, explains Basic Fun's Furman. His Florida-based company makes Tonka trucks and Care Bears toys.
"It's held by my company, [US] Shipping, the retailer," he says.
If we allow $2.65 for the US delivery company, the toy company and retailer usually split the remaining revenue 50-50. So he gives them $10 each.
While profit margins are commercially sensitive and therefore not publicly disclosed, industry studies show that the toy company and retailer typically make a profit of up to 25%, or $2.50.
Getting a toy on the shelves in the US requires both a lot of work and a long journey.