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Credit: CFP
AsianFin -- As POP MART's original character Labubu found global fame, a wave of similar Chinese-made toys—such as Lafufu, Lababa, and Labobo—quickly followed, capturing the attention of consumers worldwide.
This blend of creativity and manufacturing prowess highlights a major shift underway in China's toy sector, one where design and brand-building are becoming as crucial as scale.
Amid a turbulent global trade environment, China's toy industry is navigating a critical moment of transformation.
In 2024, 65.5% of China's toy exports were shipped under independent brands via general trade, a sign that efforts to pivot from OEM to branded production are gaining traction. However, many factories remain reliant on low-margin OEM orders, exposing them to sudden shifts in global demand and leaving them with little pricing power.
"We don't want to just be OEM suppliers anymore—we want our own brands and IP," said a toy entrepreneur from Shenzhen. "That's the only way we'll have global influence."
The inflection point came in September 2022, when China's 26-month streak of toy export growth ended. Global economic slowdowns and supply chain realignments revealed the vulnerability of an industry deeply dependent on OEM. Despite growing awareness, the shift away from contract manufacturing proved difficult.
After two consecutive years of export contraction, 2025 brought further pressure in the form of steep tariffs. For Zheng Lin (pseudonym), who operated a toy OEM factory in Zhanjiang supplying U.S. giant Mattel, the result was immediate: orders dried up and production lines halted.
"We had no choice but to wait and hope the policy wouldn't last," she said, echoing the sentiment of many factory owners caught in policy crosswinds.
The U.S. remains China's largest toy export market, accounting for over $10.5 billion in 2024—or 26.5% of total toy exports. Bank of America estimates that around 40% of Mattel and Hasbro's products sold in the U.S. are made in China. Even as some tariffs eased and production resumed, intense cost pressures, price-sensitive buyers, and shrinking margins continue to challenge OEM-focused players.
With growing uncertainty around the U.S. market, Chinese toy companies are proactively looking elsewhere.
"We've realized we can't rely on just one market," said Xiao Juan (pseudonym), a doll manufacturer in Yiwu. Her company now focuses on Russia, Pakistan, Tajikistan, and Latin American markets.
"We don't select markets arbitrarily," she said. "We respond to trade policies and consumer feedback. If a market shows promise, we invest. If it doesn't, we scale back."
Thanks to robust supply chains and cost advantages, Chinese toys are increasingly favored in the Middle East. At the 2024 Canton Fair and Hong Kong Toys & Games Fair, many exhibitors reported record interest from Middle Eastern buyers. Countries including Saudi Arabia, the UAE, Turkey, and Israel each imported over $100 million in toys from China last year.
Toy makers are also entering these markets with local flavor—creating region-specific IPs and animation-themed toys to win over young consumers.
Southeast Asia's rising middle class and Europe's stable channels are also attracting Chinese exporters. Simultaneously, many factories are now eyeing China's booming domestic market, driven by surging demand for designer toys and anime-themed products.
"In the past, we only looked abroad. Now we see domestic demand is just as strong," said a Guangzhou-based factory operator.
According to the Guangdong Toy Association, the traditional toy market in China reached 77.4 billion yuan in 2024, growing 4.6%, while the designer toy segment surged 26% to 72.7 billion yuan.
With traditional OEM under pressure, many Chinese companies are investing in high-value designer toys and original IPs.
Wang Tingting (pseudonym), who manages operations for a Shenzhen-based toy brand, says her company's figurines and blind boxes—produced in Dongguan—have found traction in U.S. offline retail chains, with North America accounting for up to 8% of sales and projected to hit 10% this year.
"The difference is ownership," Wang explained. "OEMs can be replaced. IP owners cannot."
When U.S. tariffs rose, her company's products—sold wholesale for $5 and retailing for $20—easily absorbed the increase, as emotional purchases allowed for price elasticity. "At $24 or $25, consumers still buy. IP offers pricing power," she said.
However, operating an IP brand isn't without hurdles.
Zhou Ting (pseudonym), whose factory in Shantou works with a Guangzhou-based animation IP, said cultural misalignment posed challenges in the U.S. market. "American kids relate to heroism. Our IPs are rooted in Chinese folklore and symbolism, which don't always translate," Zhou said. Their U.S. expansion has since been paused.
Beyond mass-market and designer toys, Chinese toy makers are also finding new value in handcrafted collectibles and artistic models. At the 2025 China International Model Expo, a palm-sized model vehicle priced at over 6,000 yuan drew significant attention.
These high-end toys, often handcrafted and hand-painted, appeal to niche collectors globally. "We're no longer just producing cheap plastic toys," said a Dongguan model studio founder. "We're creating art—with higher margins and less vulnerability to tariffs."
Chinese model studios are now gaining orders once dominated by Japan, the U.S., and Europe, as China's creative toy ecosystem matures and gains global recognition.
From Labubu's viral success to the premium appeal of handcrafted model toys, China's toy industry is charting a bold new path. Faced with policy shifts, rising costs, and global uncertainty, companies are not simply reacting—they are redefining what it means to be a toy maker in the modern era: embracing IP, diversifying markets, and leaning into creativity to power the next wave of global growth.
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