China’s New Year Business Blackout

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China’s New Year Business Blackout

It’s said to be the largest seasonal migration of humanity on the planet. Every Chinese New Year (aka Lunar New Year), more than 100 million Chinese workers take leave from their jobs to return to their hometowns to celebrate the New Year Spring Festival with their families, clogging the country’s transportation systems and idling factories and other businesses. With Chinese New Year falling on Jan. 23 this year, this exodus is already underway.

For foreign companies that are new to trading with the mainland, this virtual shutdown 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 rites go on for another 15 days. Because many workers began leaving work this week to ensure they can get seats on overcrowded trains, commerce may conducted at half-speed, if at all, starting the second week of January. Millions of employees do not return to their jobs until after Feb. 6.

Clued-in Western companies that rely on Chinese suppliers 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 production is greatly curtailed; 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 the Spring Festival, 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 warning customers about the impact of Chinese New Year on production schedules as early as October to avoid bottlenecks and shipment delays. Ordering early is encouraged. “We try and complete all [early] orders before the new year,” Yu says. “Orders received in the month leading up to [Jan. 23] won’t be filled after 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 fresh 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, we will not be able to provide accurate information, including shipment and other details, since other suppliers in the supply chain are on vacation.”

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 huge backlogs of packages.

How are shippers 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 labor 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 us 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 says, noting that employees endure grueling 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.

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