Despite all the pomp and circumstance, the arrival of 2020 probably hasn’t changed much in your life; you might even be wondering what all the fuss was about. But beware: over one-sixth of the world’s population is still anticipating a new year’s celebration that generates the largest annual human migration on Earth and (consequently) jeopardizes the logistics infrastructure for any business outsourcing from China.

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WHAT EXACTLY IS CHINESE NEW YEAR?

The Chinese New Year (CNY), also known as the Spring Festival, is the first day of the lunar new year. As one of the most important holidays in Asian culture, CNY is celebrated by over 1 billion people, including residents of mainland China, Hong Kong, South Korea, Tibet, Vietnam, Singapore, Indonesia, Malaysia, and other areas with large Chinese populations. The New Year itself is a seven-day public holiday and on the eve of the new year, Chinese families traditionally celebrate with a massive reunion dinner - the most important meal of the year. This year, the CNY festival starts on Saturday, January 25th and goes until February 8th - about 15 days in total. According to Chinese Zodiac, 2020 is the year of the Rat.

CNY is the source of the largest annual mass movement of people: the spring migration, or chunyun. Each year, chunyun sees a record number of travelers clogging roads, trains, and airports as over 1.3 billion Chinese residents return to their hometowns. (For reference, 115.6 million Americans traveled during Christmastime in December 2019). Last year, the holiday season saw just under 3 billion trips made by road, rail, and air in a 40-day period. This year, the Chinese rail network expects this figure to increase by 8 percent and has increased its capacity in anticipation of the estimated 440 million rail journeys that will occur over the five weeks leading up to the new year on January 25, 2020.

The large holiday brings major spending across China, impacting stock markets, factory production, and economic activity. Last year, polled respondents in Singapore, Malaysia, and Indonesia indicated an average holiday budget of $1,890, $1,000, and $800, respectively. In all three countries, spending was primarily on food, gifts, and travel. Similarly, Chinese consumers reportedly spent just under $140 billion in retail and catering services.

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CNY IS COMING

While business in China prospers, CNY and chunyun are quite disruptive to the global supply chain. Because China is the leader in the global exporting industry, global supply is severely affected when the country’s manufacturing infrastructure shuts down for anywhere between one to four weeks. Many factories also lose a significant number of employees during CNY as workers take advantage of the holiday labor shortage to secure better wages at other facilities. Roughly 40% of Chinese employees may not return to their factory after CNY, leading to a massive decline in output until new workers can be found and trained.

To prepare for the implications of these production changes, be sure to:

• Plan ahead by building a picture of anticipated demand to ensure your company’s stock can weather the decrease in production.
• Avoid waiting until the last minute to place your order - plan, book, and confirm transportation shipments in advance of CNY.
• Be aware of the potential for diminished quality close to the holiday.
• Minimize risk by looking into alternative sourcing strategies outside of China.
• Monitor production levels after CNY to ensure they return to normal.

Want more information about how your business can mitigate the effects of CNY? Reach out to us via email (hello@castusglobal.com) or through our contact form. We can help you navigate this shift in any market across the globe.