China is starting to feel like the outcast child picked on in the school playground. Hardly a day goes by without more bad news about some dodgy product “Made in China”.

Gaining such a reputation is a risk when a country transforms itself into the workshop of the world, an unending source of cheap goods. Many of its manufacturers do ensure quality, but many others are too eager to make a quick profit to stop and count the long-term cost.

The decision by Mattel to recall nine million toys made in China is the latest blow to the country’s manufacturing reputation. Reeling from a string of food and product safety recalls this year, Chinese officials acted swiftly last week to punish two toy manufacturers, contracted to US brands, that used paint with excessive amounts of lead.

China imposed an export ban on both companies and told them to clean up their act. The owner of one company hanged himself at the weekend. The Government wants to restore confidence in Brand China after recalls ranging from tainted pet food and poisonous toothpaste to defective tyres.

In the short-term the impact on China is likely to be minimal. About 80 per cent of the world’s toys are already made in China, mainly by companies that have contracts to supply big companies such as Mattel. Chinese officials say the country has more than 10,500 toy-makers and Mattel alone uses some 3,000 companies.

The latest recall will be a blow to those companies but thousands more will be unaffected. As for China as a whole, toys make up a tiny proportion of its exports. Its trade surplus soared 67 per cent to $24.4 billion in July from a year earlier.

China is aggrieved and anxious at the blow to its reputation. Bo Xilai, the Commerce Minister, has even spoken out to offer reassurances that 99 per cent of goods meet standards.

But the criticisms and recalls may be part of a process that the Government welcomes. It does not want “Made in China” to be associated only with cheap goods. Indeed, the Government recently introduced a string of tax changes and regulations aimed at forcing low-end exporters to move inland, away from the prosperous seaboard. Factories may take a hit on pricing but they will gradually move up the ladder and become even more formidable competitors — just like manufacturers in Japan, Taiwan and Hong Kong before them.

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