◼ BUSINESS Bloomberg Businessweek August 31, 202012
ILLUSTRATIONBYHUNTERFRENCHFORBLOOMBERGBUSINESSWEEK.KOZLOWSKI: JEROD HARRIS/GETTYIMAGES.DATA: U.S. CENSUS BUREAU, NATIONAL BUREAU OF STATISTICS OF CHINAChina’s Factories Need
A Little Christmas
InJanuarytoymakerDaveCavewasfeelinggood
abouttheyearahead.Orderswerecominginfor
MightyMegasaur,andhewasreadyingaracing
game to coincide with the release of the latest
installment in the Fast & Furious franchise. Then
the coronavirus shut down the world economy, and
Vin Diesel announced the flick would be pushed
back a year. Cave saw demand collapse. His Hong
Kong-based company, Dragon-I Toys, which makes
its goods in China and sells them to 240 retailers in
53 countries, including Walmart Inc., was forced to
cut costs as it waited for the crisis to pass.
Now, as global retailers start to stock up before
the crucial yearend holiday-shopping season, a
hopeful Cave says Dragon-I Toys’ order book is at
its best level in years.
“Nobody has canceled any orders in the last six
to eight weeks, so everybody is being very optimis-
tic that Christmas will happen,” says Cave, whose
company is one of the world’s biggest manufactur-
ers of toy dinosaurs and the maker of the popu-
lar Chatimal the Talking Hamster. “The only worry
that everybody has now is if this pandemic does
get worse, and we get into a situation where the
governments in these countries really go back to a
phase where everything is closed down.”
How the holiday season plays out will reveal a
lot about how consumers worldwide are recover-
ing from the pandemic shock. Exports are a declin-
ing share of China’s overall economic growth, and
not all industries benefit from Christmas demand,
but shipments of consumer goods are still a crucial
indicator of confidence globally.
China’s exports rose 7.2% in dollar terms in
July vs. a year earlier, mostly on the back of strong
demand for electronics, but they were also helped
by purchases of anti-coronavirus products and
orders for furniture and toys. Exports to the U.S.
rose 12.5% in July from a year ago, the fastest rise
since 2018 despite tensions between the two nations.
Other gauges are also improving. The Port of Los
Angeles,thebusiestintheU.S.,saidJulywasits
strongestmonthoftheyearsofar—andthesecond-
best July in its history—helped by factors includ-
ing retailers stocking up on inventory. While U.S.
retail sales growth slowed in July, sales have already
made up the ground lost in the spring.JustinYu,a salesmanageratZhejiang-based
PinghuMijiaChildProductCo.,whichmakes
toyscootersandelectronicvehiclessoldbyU.S.
retailers,hasalreadyseenordersreboundtopre-
pandemiclevels.SinceearlyJulythefactoryhas
beenrunningatcapacity,andit’sfullybooked
untilmid-October.Traditionally,Julytomid-
Octoberis itsbusiestperiod,astheholidaysea-
sonaccountsfor60%to70%ofthecompany’s
full-yearsales.
“Ourfactoryisrunningovertime,”saysYu,
addingthatevenhisofficeworkersaregoingonto
thefactoryfloortohelp.“Weareverybusy,as
muchaswewerethepastyearsatthistime.”Still,
heestimatesthatsalesinthefirsthalfweredown
20%to30%andthatsecond-halfsaleswillbeflat,
resultingina full-yeardropof10%to20%.
WhileChinaremainstheonlymajoreconomy
forecasttogrowthisyear,unemploymentis still
high,andtherecoveryis patchy.Producerprices
fell2.4%inJulyfroma yearearlier,withknock-on
effectsforprofits,hiring,andinvestment.That’s
whymanyarelookingcloselyatholidaydemand.
“Althoughthepandemicis veryserious,people
still look forward to Christmas,” Yu says. “It’s a
kind of revenge spending after a long depression
of sentiment. The difference could be fewer par-
ties this year, but those who celebrate Christmas● Now that the global reopening boom is fading,
they’re counting on holiday cheer to boost sales7/2019 6/Q3’19 Q2 ’$56b504480%757065▼ U.S. monthly imports
of consumer goods,
seasonally adjusted▼ Chinese industrial
capacity utilization