Factories in the world’s biggest exporting nation close their doors and workers pile onto buses and trains to head home in the largest annual human migration on Earth. Business and trade grind to a halt.
Chinese New Year is the most celebrated festival in the Chinese calendar, equivalent of Christmas and the Super Bowl in the United States. As China’s position in the world shifts, the festival now influences not only those that celebrate it, but has a wider effect internationally – particularly for those doing business with China.
Lia Sagehorn is working at a local clothing brand Tobi, an online retailer based in Los Angeles that specializes in young women’s fashion, with vast majority of its merchandise being imported from China. “We’re almost shut down for the next three weeks,” said Sagehorn. For a few weeks her factories in China will be incommunicado, which means no shipments, no calls, not even an email.
Image: Associate designer Chrystal Lacza works on drawings at her desk at online clothing retailer Tobi in Los Angeles. This is the company’s slow period because of Chinese New Year. (Francine Orr / Los Angeles Times)
When you’re connecting with manufacturers in China like Sagehorn, you have to observe Chinese holidays. In Los Angeles, countless clothing retailers, toy sellers and electronics distributors rely on China for the bulk of their goods. In 2015, imports from China through the ports of Los Angeles and Long Beach estimated to be $162.7 billion, topped the source of imported goods through the two ports by far, said Jock O’Connell, an international trade economist with Beacon Economics.
Business Implications of Chinese New Year
Reunion is the main theme of the festival, and most people make the journey back to their hometowns to celebrate with their families. This year the transition from the year of the goat to that of the monkey will begin on February 8, and the celebrations officially culminate on the 15th day but normal business has typically been restarted by day 8 – an auspicious number in Chinese culture. Having knowledge about the complex dynamics of the Chinese New Year, it’s imperative to be aware of the effects of a nationwide shutdown, particularly related to delays and quality issues.
Companies are supposed to plan ahead prior to the New Year. Some factories close a week or more before the official holiday begins, indicating the diminished quality of some products that time of year. This is the reason that you should never relax quality assurance and inspection procedures on the products.
While the festival is coming to a close, many manufacturers struggle to be fully return to normal operations. This causes severe disruptions across the supply chain. Big companies prepare for this issue by leveraging strong relationships with their contract manufacturers to ensure that they get first dibs on production capacity before the new year.
In conclusion, the shutdown of factories in China during the New Year will be influential on their global partners. It is still a long way to be prepared for Chinese New Year from a business perspective to avoiding significant problems. This time of year in China may not be wholly convenient, but handling both the problems and opportunities the festival brings in the right way can set your company apart from the rest.