New Year’s Influence and Outsourcing to China

The Chinese New Year’s holiday influences businesses in several ways. The most obvious involves purchases made by those celebrating the occasion. Festivities are common within China as well as around the world, so the small economic benefit that comes from increased retail sales is seen in a variety of business sectors. Many other factors influence businesses, however, and Western analysts often misunderstand these factors.

Purchases Made by Celebratory Customers

Fireworks are an essential part of Chinese New Year celebrations, and many firms hedge a bet on increased firework sales during the traditional week-long holiday. Due to economic conditions as well as pollution concerns, fireworks are not as popular as they once were inside of China. Local retailers in communities outside of the country continue to see increased sales, however. Some companies within China that manufacture fireworks also report increased profits during the season.

Restaurants and other small businesses will also enjoy higher profits during this time, as they do during any major holiday. Some families exchange gifts during the week, but this is a relatively modern invention and hasn’t been widely adopted just yet. Extremely active traders will sometimes see a jump in their investments as a result of these short periods, but they usually aren’t significant for those who are involved in long-term investments. Small businesses do enjoy the additional earnings, however, and they generally benefit from the celebrations.

Work Stoppages for the New Year

Organizations who are actively outsourcing manufacturing to China should pay close attention to the holiday season. Numerous facilities close down in observance of the Lunar New Year festival, and many of them are closed for the entire week. This can lead to work stoppages and other types of service disruptions. Understanding the holiday’s schedule can help to prevent any problems.

Some factories and shipping centers stay open, but facilities that stay open generally reduce staff during the Lunar New Year’s week. This translates into slower shipping for many types of products, and some services will be drastically scaled back. Business leaders have to understand these work stoppages and plan accordingly. Acquiring a schedule from the facilities in question is very important when attempting to plan around the festivities.

New Year Celebrations Outside of China

Even some companies who aren’t currently outsourcing manufacturing to China have been influenced by the festival’s schedule. In Suriname the government recently declared Chinese New Year a holiday, and some business owners have expressed serious concerns over this maneuver. They fear that it might cut drastically into profits. Similar moves will probably happen in other areas with a significant Chinese diaspora.

Celebrations in countries throughout Southeast Asia slow down certain services as well. Business leaders are always encouraged to look into what local activities might influence their operations regardless of whether or not they’re outsourcing manufacturing to China.

In spite of all of these concerns, the holiday season lasts for only a week. Production resumes the following week, and increased orders generated by the holiday more than outpace losses incurred from any slowdowns. Proper planning will ensure that everything goes smoothly.

As always, ITI can help with that. Contact us today!

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