How a Chinese-made toy gets to a US retailer

AFP via Getty ImagesChina is the world's largest toymaker, producing the majority of toys on sale in the USOn the underside of most children's toys on sale in the US you'll find the same three words – "Made in China".Nearly eight in 10 toys (78.3%) imported into the country in 2024 came from China, according to US government figures. Last year, toys imported from China were worth $9.8bn (£7.4bn), trade figures show. With Christmas on the horizon, the toy industry in the US and elsewhere is about to have its busiest time of the year by far.As retailers prepare their stocks for the festive rush, be they online giants or "mom-and-pop" physical stores, the BBC World Service's Follow the Money series traces how a toy gets from a factory in China to the US. And where the money goes.The factoryGuangdong province, which neighbours Hong Kong in southern China, is the heart of the country's toy manufacturing industry.In the city of Dongguan workers on the floor of the Mihox factory pop plastic toys out of steel moulds, and pile them into crates ready for painting.The company says it employs more than 800 people and makes around 55 million toys a year for the American market, which represents half of its business.Every toy starts with a design from a customer, such as an American toy company. The factory then makes a prototype, and builds moulds from which plastic parts and other components are formed.Going from the first idea to finished toy takes one to two years, says Melanie Wang from the Mihox sales team. Much of that is the customer going back to the drawing board. "They modified the design again, again, and again to improve it."Once the design is signed off, things move more quickly. A mould takes about a month to make, and the production run lasts about three months.MihoxThe Mihox factory in Dongguan employs more than 800 peopleSo, how much of the US retail price does the factory get? "About 20%," says Wang.On a $30 toy, that's $6, which has to cover the price of the plastic and other materials, production costs including wages, and what profit the factory makes.Chinese factories typically make a profit of between 3% and 10%, according to Jay Foreman, chief executive of US toy firm Basic Fun. So for a $30 toy that's between 60 and 18 cents of the $6 the factory charges to make it.Samson Ko is president of the Toys Manufacturers' Association of Hong Kong. Many of his members moved their factories across the border into mainland China in the 1980s, attracted by cheaper land and labour.He says the way toys are made has barely changed since then. "Automation now takes place mostly in the moulding and the packaging process. But for soft toys, or even some of the electronics nowadays, it's still very labour intensive."And Chinese labour isn't cheap anymore, he adds, after recent rises.MihoxMelanie Wang explains that Mihox gets 20% of a toy's retail priceAverage pay in Vietnam is about half of that in China, said one report at the start of this year.Yet fewer than 10% of Ko's members have moved any production outside China, and in those cases mostly only because customers asked them to do so.The Chinese factories remain busy, he says, because a single toy can undergo more than one manufacturing process, from moulding the parts, to adding electronics, sewing materials, and final assembly. This often requires it travelling to different factories.Ko adds that in Guangdong these separate facilities are located close to each other, and used to "working in harmony". He says this makes the whole manufacturing process run more smoothly than in other countries.The shipFrom the factory, the toy goes by truck to a port, such as Shenzhen, the biggest in Guangdong.Ivy Tse is co-founder of FreightAmigo, a Hong Kong logistics company that runs an online platform for both Hong Kong and mainland China exporters. These businesses can book a cargo container, sea passage to an overseas destination, arrange insurance cover, and secure finance.Tse says it takes about 15 days for a cargo ship to get from Shenzhen to the US west coast, and 25 to 30 days to the east coast. This year's Christmas toys left China in August and September.Freight, from factory to the US, usually adds about 10% to the manufacturing cost of a toy, adds Tse. So if we stick to a toy that retails for $30 in the US, and therefore costs $6 to make in China, the cost of getting it to the states is 60 cents.The US borderOnce the toy reaches the US there is currently a tariff on Chinese toys that has to be paid to the US Customs and Border Protection (CBP).Following talks between President Trump and Chinese leader Xi Jinping last month, the two governments have recommended toys for lower tariffs. But no new rate or start date has been set, and the US must first hold a public consultation. For now the basic rate is 12.5%, and some toys pay more.This is charged on the manufacturing price of the toy, not on how much it retails for. So for a $30 toy, that basic rate is 12.5% of $6, which is 75 cents.This tariff is paid for by the American company that has imported the toys. One such firm is Learning Resources, a family business based near Chicago that sells educational toys. Half of these it imports from China."We pay 100% of the tariffs, let there be no doubt about that," says the company's chief executive Rick Woldenberg.The US toy companyBasic FunJay Foreman says that most of the money spent on a toy in the US doesn't leave the countryThe cost of making the $30 toy, getting it to the US, 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 US, explains Foreman from Basic Fun. His firm, which is based in Florida, makes Tonka trucks and Care Bears cuddly toys."It's kept by my company, the [US] transportation company, the retailer," he says.If we allow $2.65 for the US delivery firm, the toy company and the retailer will typically share the remaining revenues 50-50. So that would give them $10 each.While profit margins are commercially sensitive and therefore not generally revealed, industry studies show that the toy firm and retailer would usually make a profit of up to 25% or $2.50.Getting a toy onto the shelves in the US requires both a lot of work and a long journey.