The Chinese New Year, or Chinese Spring Festival, in the United States is often nothing more than a blip on the radar. For some Americans, the holiday comes and goes without them even noticing.  For the Asian people, it is a very important time of the year.  For the non-Asian getting their products from China, it is important to understand why this is so important.  The Chinese New Year affects your supply chain at the very source.

What is Chinese New Year?

The Chinese New Year, sometimes called the Chinese Spring Festival, is an annual festival of 15 days.  The actual dates are fluid and are determined for the upcoming year in October of the current year (details follow later in the blog).  Chinese law states the holiday falls for seven days between January 31 and February 6.  However, many companies take up to 15 days off since many employees save their annual leave for this particular time period.

It is common to refer to the holiday as the Lunar New Year due to the correlation with the moon phases.

 

Folk history of Chinese New Year

There are two stories that prevail for the beginning of the holiday.  The first was a monster, Nian, who lived on the bottom of the sea and came to a seaside village on New Year’s Eve.  On this day, Nian would eat livestock and harm residents.  People fled to the mountains for protection until Nian left.

An old man came along on New Year’s Eve to the village and sought refuge with an old woman, who had not fled for the safety of the mountains.  He promised to rid the world of Nian in exchange for a night’s stay.  That night, Nian came to the village and found every door covered with red paper and brightly lit inside.  This scared him, and he fled.  The remaining villagers returned and recognized how to scare Nian.  For every new year thereafter, the villagers would hang red cloth, light firecrackers and light up the night.  Family and friends come together on the first day for this and is now known as the Spring Festival.

The second story dates back to before 2000 B.C.  This story relates how Shun took the throne of the Son of Heaven, and his subordinates worshiped the heavens and earth.  This day became the beginning of the new year and then the Spring Festival.

 

How long does Chinese New Year last?

The Chinese New Year for 2022 began February 1, 2022.  This meant most offices and factories were shut down for approximately three whole weeks.  This time was necessary because many employees travel to their original homes, often their birthplace as well, to spend this time with family.

It is very much like Christmas in the West with the exception of the country-wide shutdown.

 

Mass travel time

The concept of the Chinese New Year is much different than that in the West.  In the East, it has the concept of ‘reunion’ and ‘together.’  This means a very large number of Chinese people are traveling.  Some will travel a considerable distance, and others will hardly travel at all.  Each new year, millions and millions of people fill China’s roads and transportation networks to return home for this special time.  The travel to and from the ancestral homes represents the largest migration on earth.

 

Shanghai, Beijing and Guangzhou

These three cities in China, the largest three in China, will have a mass exodus of workers returning to their home provinces across the country.

Coastal cities

A large percentage of the work force, approximately 80 million, live and work along the coastal areas of China.  Cities like Shenzhen, Xiamen, Shantou and Zhuhai are filled with people who, in the 1970’s economic boom,  moved to these areas in search of a stable paycheck.

 

Other Asian countries

Indonesia, Malaysia, North Korea, Singapore, South Korea, Vietnam and Brunei also take this time very seriously and actively participate in the Chinese New Year as well.  Some may have even come to China for work and are looking forward to the return home for a period of time.

 

Important customs

It is important to note that there are certain customs at this time.  These evolved from traditional folktales and beliefs.  Maintaining the same in the modern period is considered good Chinese custom.  As a business owner, it makes sense to be aware of them.

  • Red – Red is the color of luck.  Black and white are mourning colors and should be avoided.
  • Mandarins – This relative of the orange has the same meaning as ‘luck’ in the Chinese language.
  • Red packets – Red envelopes are often filled with cash, making them especially prized by children.
  • New Year’s Eve – Similar to Thanksgiving and Christmas – there are not big parties.
  • Complete shutdown – The focus of this particular blog.

 

When is Chinese New Year 2022?

The General Office of State Council formally adopts the when the Chinese New Year will be in October.  The official dates for when the Chinese New Year begins and ends in 2022 were chosen in 2021.  The same for 2023 will be decided in October 2022.

Here is the official website for State Council’s announcement on the official dates. The site is in Chinese, but Google will adequately translate the information for you.

Resource: http://www.gov.cn/zhengce/content/2021-10/25/content_5644835.htm

The following dates were for the Chinese suppliers observing the holiday season.  The Lunar New Year sometimes start earlier, around January 31.

  • New Year’s Day: The holiday was from January 1 to 3, 2022, a total of 3 days.
  • Spring Festival: The holiday was from January 31 to February 6, a total of 7 days.

These are merely the dates of the actual celebrations.  Most of the country will be doing something similar to the following:

  • Mid-January – Production halts
  • Mid to near-end January – Exodus from factories
  • Mid-February – Employees return
  • February 21 – Nearly all employees back
  • February 28 – Operations are close to normal again

 

Reasoning for the long periods

This may seem like a good bit of lost time for the supplier.

The shut down period beforehand is important to allow for the necessary travel time for employees.  This means there is a rush at the export point as freight loads need to be ready to ship.

There is also the return period to take into account as people will be traveling back to their employment locations.  This is also a time when many switch jobs or fail to return to work.  Production times often lag as suppliers look for fresh labor and increased production orders.

 

Other important China holidays

The Chinese New Year is only one China holiday, and these holidays are based on a lunar calendar.  Lunar calendars assign days by the moon phases, so many of the China holidays will vary.  There are other holidays to consider as well, although these will not have nearly as much effect on supply chains.  There is a possibility of some disruption, but proper planning will minimize risk.

  • Qingming Festival: April 3 to 5 holiday, a total of 3 days.
  • International Labor Days (1st Golden Week): April 30 to May 4 holiday, a total of 5 days.
  • Dragon Boat Festival: June 3rd to 5th holiday, a total of 3 days.
  • Mid Autumn Festival/Moon Festival: September 10th to 12th holiday, a total of 3 days.
  • National Day(2nd Golden Week): October 1st to 7th, a total of 7 days.

 

China shutting down – Effects on your business

This background is necessary to give you, the buyer of Chinese products, the necessary understanding of why you may experience some lag time and delayed responses from your product sourcing specialist and suppliers as a whole.  Here is what you can expect to have happen annually during Chinese New Year.

 

No production

Chinese New Year is a public holiday, similar to the public holidays celebrated in the West.  This means everything is shut down completely.

 

Product quality

Like we said before, there is a chance of many switching or not returning to jobs.  This means there may be an influx of unskilled labor and poor quality products.

It may come to you as a surprise, but many times factories will not accept returns or re-run orders.  Those who need products quickly may be forced to accept this as a cost of doing business with China.

Sourcing Nova will do everything we can to prevent this from happening with inspections of the factory and random product inspections

 

Shipping delays

As many products as possible will be completed and made ready for shipping.  Many in the coastal areas involved with freight and cargo may leave earlier because of travel distance.

The pandemic has also led to delays.  Many in the logistics industry have plans and adjusted for shipping delays, in addition to the Chinese New Year delays.

 

Shipping cost increases

Chinese New Year has always had an upswing in shipping, but the pandemic has made shipping costs even higher.  Sea freight has seen the largest increases with the small and medium-sized buyers like yourself taking the brunt of the costs.

 

How to prepare for the country-wide shutdown

Now you know about the dates and expectations of Chinese New Year.  What can you do to prepare accordingly and keep your customers happy?

The following tips will help ensure a smooth and timely period while supply chains are at a standstill.

 

Be aware of potential issues with previous year’s data and sales

The first portion of this piece covered the necessary information about the Chinese New Year.  Plan accordingly based on data from previous years.

 

Be in a good relationship with your team

When we say team, this means your product sourcing specialist and supplier.  New businesses may have somewhat of an uphill battle with this.  Newer accounts within suppliers are often put at the back of the order queue.

We have extensive experience with Chinese New Year and know what factories are best equipped for this time.  It is best if you are on top of your side of the business to maintain those relationships.  This means prompt payment, clear expectations and reasonable requests.

 

Order ahead

If you are established and experienced, you will have ample data and sales metrics.  This way you can be sure to have ample product on hand for the first few months of the new year.  Here is a good way to keep product on hand for the Chinese New Year period:

For any March orders, get 50 percent of that order for January and the other 50 percent in February.

This will certainly get you in the good graces of the suppliers since you had forethought to order well ahead.  This will also mean time to bring in and train new labor because of the inevitable changes that take place.

Remember: Fail to plan; plan to fail.

 

Have stock on hand

This is a part similar to the previous tip.  If you have an idea of product you need through the first part of the year, order a small amount over early for certain delays.  This includes best sellers and slow moving products.  Do not go overboard by any means, but do have enough to carry over.

Seasonal products like products for Valentine’s Day, Mardi Gras and Easter should be ordered exceptionally early.  Manufacturers do not return to work and immediately jump back into processing orders.  There are a few kinks to clear.

 

Have product in port early

When we say early, we mean no more than 10 days before shipping.  Sea freight companies are well aware of the Chinese New Year and will raise freight costs.  Those who cannot afford the sudden increase will have to wait until the next available shipping time, which could be weeks away.

Sourcing Nova has a solid relationship with our freight forwarding company and will get products to port on time provided you have done your due diligence.

 

Be ready to be flexible with suppliers

Sourcing Nova always has backup plans in case of disruptions with chosen suppliers.  This way if something should happen during Chinese New Year or at any other time, your products will still make it to your destination.

There are other manufacturers in Asian countries, but Sourcing Nova does not have relationships with those companies.  Use them at your own personal risk.

 

Quality Management Planning

A large order of bad product is as bad if not worse than late product.  Quality often falls when suppliers are in a rush.

This means a quality management and inspection plan is key to your continued success.

 

Vendor-Managed Inventory

VMI means there is an agreement to have a certain amount of product on hand at all times.  This means being on top of orders and seasonal demands.  Companies like Amazon have VMI, whereas if you are a dropshipper, it may not be an issue at all.

 

After the Chinese New Year

Things will return to normal after Chinese New Year, but this is after some of the rust is cleared and new employees are trained.
The first few months after Chinese New Year are crucial to product success.  Keeping your quality and inspection services going at this time is absolutely vital.
There are often orders that are backed up at the supplier and running to the raw material supplier.  This means a backlog of orders and production capabilities running at maximum pace.
Some will even cite the Chinese New Year as an excuse for poor work and shoddy products.

 

Plan early – this an annual event

Think about it like this: Most businesses plan for the Christmas season as early as August and the return to school in May.

The earlier you are ready for the Chinese New Year each year, the better off you will be.

 

FAQ for Chinese New Year

There are a few more things we did not cover.  Here they are in no particular order.

Does Hong Kong celebrate Chinese New Year

Celebrations extend outside of the Chinese mainland into Hong Kong and Taiwan.  You can expect similar situations in both these locations as you can in China.

 

What is the last day for people to be away for the celebration?

The last days of the festival are normally in mid-February.  However, there is still the return time to locations, settling back in and the rest of the details that come with returning from a holiday or vacation.

 

What is my products are not ready?

Production will continue after everyone returns to the factory.  The rest is based on how far along they were at closing.

 

Should I pay before Chinese New Year?

This is a two-part answer.

If your order has shipped and is en-route, it is Chinese culture to settle all debt before the new year.  Consider the New Year Eve as the payment deadline.

If your order has not started, it is best to wait until the factories are back open, have all employees back, new employees trained and normal production restarted.  Paying early could mean sub-par products and lost income.

 

Why is the risk of quality issues higher post-Chinese New Year?

The Chinese New Year is a time when many begin looking for different or more skilled work.  As many have taken the time to learn particular skills or operate certain machinery, people take this time to look for new employment, better pay and the like.

This means many manufacturers will be looking into new employees and with it, training periods.  This  means a likely drop in quality as people learn new skills, operate new equipment and learn things in general.

This is not likely to be an extended period, and Sourcing Nova will work with you and the supplier at this time.

 

Final Thoughts

It is always wise to prepare for holidays in both the West and the East.  Understanding the Chinese New Year and business will make this period much easier for you and your customer base.  Sourcing Nova is always welcoming new business partners, even during Chinese New Year.  How can we start preparing for your first order?