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Coping with China’s Business Black Hole: Chinese New Year
Jim Erickson from Alibaba.com has today given us a heads up on the Chinese New Year and what the implications of the Chinese national holiday period are for online retailers looking to source goods from China.
It’s said to be the largest seasonal migration of humanity on the planet. Every Chinese New Year, more than 100 million Chinese workers take time off to return to their home-towns to celebrate the New Year Spring Festival with their families, clogging mainland transportation systems and idling the country’s factories and other businesses. With Chinese New Year falling on Jan. 23 this year, this exodus is already under way.
For foreign companies that are new to trading with the mainland, this virtual shut-down of the country’s commercial activity may come as a shock. China’s government offices and stock markets will be closed for the week of Jan. 23, but New Year Spring Festival celebrations go on for 15 days—and because many workers began leaving work this week to ensure they can get seats on trains heading home, commerce may conducted at half-speed, if at all, starting the second week of January and lasting until after Feb. 6.
Clued-in Western companies have learned to plan around the period. “It’s all about communication and managing expectations,” says Nelson Yip, a vice chairman of the Hong Kong Electronics & Technologies Association, a trade group whose members operate manufacturing plants in China. Not all factories completely shut down for an entire month, but shipping delays are common and phones may go unanswered. “I think small orders may be acceptable, if buyers ask for some standard product,” says Yip. “That’s manageable. But it’s not very practical to get big orders placed” during New Year celebrations, he says.
Yu Mulin, owner of Zhejiang Sanle Plastic Co., a plastic bottle maker in China’s Zhejiang province, says that every year, she starts talking about the impact of Chinese New Year on production schedules with her western customers as early as October to avoid bottlenecks and shipment delays. “We try and complete all orders before the new year,” Yu says. “All orders received in the month leading up to [Jan. 23] will be filled after the holiday.”
Yip says it’s possible to continue a business dialogue with many suppliers over Chinese New Year. Factories with offices in Hong Kong, where workers get only three days off, and factories that conduct business through agents will still have people manning the phones. Buyers can often use the downtime to iron out production details, he says, in preparation for the restart of manufacturing.
But new orders likely won’t be processed, let alone filled. “In general we reply briefly to buyers’ enquiries during the holiday,” says Cissy Xu, general manager of Guangzhou Miti Import & Export Trading Co. in China’s Guangdong Province. “However, if discussions involve complex products or products with major price changes, suppliers will not be able to provide accurate information, including shipment and other details, since the other suppliers in the supply chain are on vacation.”
Still, as China becomes increasingly integrated with the global economy through trade and the Internet, there are signs that domestic businesses are realizing that a vital, modern economy can’t easily turn out the lights for lengthy periods. Earlier this month, the China Express Association, a national trade group of shipping companies, issued guidelines urging courier companies not to suspend operations during Chinese New Year and recommending that employees work no fewer than six hours a day to avoid delivery delays and a huge backlog of packages.
And how is the industry responding? According a recent story in the Shanghai Daily newspaper, major courier services in Shanghai are charging higher fees to offset rising costs due to surging workload and an acute labour shortage in the run-up to the Spring Festival. Indeed, real work can be accomplished during the holiday, for those who are willing to pay. Frank Lavin, who was chairman of the steering committee of the USA Pavilion at the 2010 Shanghai Expo, said that in order to open in time, construction of the pavilion had to take place during Chinese New Year. “The work crews weren’t unhappy,” Lavin said. “They just said, ‘give me three times the money.”
Yu, the owner of the plastic-bottle factory, says she is careful to explain to her new customers that Chinese New Year is to the East what Christmas is to the West—except for the longer leaves. “Workers deserve a month off to be with their families,” she explains, noting that employees endure gruelling work schedules the remainder of the year. “We’ve been exporting for more than 11 years and our customers totally understand the importance of the holiday,” she says.
When I was a little boy(many years ago when the earth was still young) my Lancastrian Grandmother told me about “Wakes Weeks” in Lancashire when complete towns would close down for a week. Now I don’t know if “Wakes Weeks” still happen in Lancashire but it sounds from the above description very much like the description my Grandmother gave me about “Wakes Weeks” in Lancashire. Although instead of all going home I seem to remember that whole towns would decamp to Blackpool. I seem to remember her telling me that you could walk through a town your footsteps echoing back off the walls and not meet a living soul.