Thursday, February 19, 2015

How Chinese New Year Festival Impacts the Global Economy

新年快乐

Even if you can’t read the above characters, their meaning is of great significance for exporters as well as for the global economy. The characters are translated as “Happy Chinese New Year,” and they are shared by more than 1.3 billion Chinese citizens and millions of others across the globe who celebrate the holiday.
It is worth mentioning, that decades ago the Chinese New Year celebrations, also called Spring Festival, had negligible impact outside of the nation. But as China has gained outsized shares of global production and economic influence, the centuries-old holiday, which has profound cultural significance in the Chinese-speaking countries, has acquired considerable prominence. This is how it impacts the global economy.

FACTORY FREEZE

The Chinese New Year is the holiday that gets companies to close their doors. This year, the holiday starts from Feb. 18 to Feb. 25, but it’s common for factories and businesses to close several days before the New Year to give workers time to travel to their families.
Thus the holiday has a significant impact on exporters. Territories with significant Chinese populations, including Macau, Taiwan, Singapore, Thailand, Indonesia, Malaysia, Mauritius and Philippines are also affected by the holiday; production comes to a halt, slowing down foreign trade as well.
Therefore, it is strongly recommended to plan ahead and schedule shipments carefully. Shipping companies usually warn customers that China’s transport and logistics networks are at capacity and their shipments must be at ports two weeks ahead of the holiday to stand a chance of getting on a boat before the country shuts down.
CRW_4947a thg red lanterns2 (web)

GLOBAL SHOPPING QUIET MARKETS

The festival in question is unquestionably the most important time of the year for family reunions, but as China has become a prosperous country, an increasing number of wealthy Chinese make their decision to travel abroad. This tendency translates into big business for international luxury brands. For instance, many British department stores are pulling out all the stops to attract the attention of Chinese shoppers. (Designer watches, jewelry and handbags can be up to 30% cheaper in Europe because of high luxury taxes in China.)
red-lanterns

 QUIET MARKETS

“Trading volumes “drop off considerably” about three working days before the start of the holiday”, said Andrew Sullivan, managing director at Haitong Securities in Hong Kong. “This year, Friday was “the last day that you can sell in Hong Kong and get your money before Chinese New Year” under trading settlement rules”, he said. “Foreign investors also tend to wind down trading in Asia as the holiday nears”, Sullivan said.

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