How You Should Expect Chinese New Year 2022 to Impact Logistics
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If you’ve been operating a supply chain out of China for any time then you’re probably well aware of the Chinese New Year (CNY) holiday. The tradition can be traced back to around 3500 years ago. Every year, it brings an almost complete week-long work stoppage to a nation responsible for 28.7% of the world’s manufacturing output.
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On the production side of things, that includes numerous headaches for businesses during the week including:
- Factory shutdowns
- Order backups
- Shipping delays
- Worker turnover
It also includes some market opportunities like:
- Big apparel purchases
- Spikes in food and beverage spending
While officially only a week long, the CNY festivities can continue all the way until the Lantern Festival on February 15th. During that time, operations in the country will likely come to a complete stop, with only some resuming immediately after. Add in the potential spread of COVID this year on top of China’s strict lockdown policies and there’s a real chance for businesses to face headwinds.
So what should you expect this year? As a business headquartered in Hong Kong, we’ve been helping businesses navigate the CNY hustle for a long time. We’ve created a handy guide below on what’s to come during this year’s national holiday lasting January 31 to February 6.
How Chinese New Year Affects Logistics
During the Chinese New Year, mainland China’s logistics and manufacturing infrastructure completely shuts down. CNY is one of the few government-enforced holidays and one of the only chances during the year for workers to return to their homes in the countryside.
Below are some common trends to expect most years during CNY.
While CNY is technically only a week-long, many factories shut down operations for as long as two weeks to allow for travel time. This two-week break - plus the spin-up time required after workers return - results in an extended period of reduced production. Make sure you’re stocked up before the season hits.
Resupply order backups
Due to the up-to-two weeks of lost productivity, a backlog of orders is certain to develop as businesses request to restock their depleted merchandise. It can take a long time for order volumes to return to normal. Delivery times can also be expected to be slowed significantly following the holiday.
Regardless of international trade, most Chinese ports close down during the CNY holiday. However, China’s ports are some of Asia’s primary shipping hubs. That means logistics in the whole region may face massive delays, price hikes, or both. If you operate a business in Asia, you should proactively check with your logistics provider to see how they plan to mitigate the situation.
High worker turnover
For many Chinese, CNY symbolizes fresh beginnings and a time for change and new opportunities. That means — you guessed it — employee turnover. This can lead to staffing shortages during a time of particularly high demand. In a pinch, some businesses may bring in untrained replacement staff to fill vacant positions. This can impact product quality and cause further delays.
What are people buying during CNY?
Chinese New Year traditions often result in an uptick in consumer spending not typically seen during ‘normal’ months.
Major activities for Chinese on CNY include:
- Eating large, home-cooked meals with family
- Gifting money in small red envelopes called hongbao
- Visiting the graves of ancestors (usually to burn paper offerings or leave snacks/candy)
- Cleaning their houses in preparation for the new year
New year, new clothes
Especially popular gifts for family members during CNY are New Year Clothes. Traditionally, these were a special type of clothing bought as a gift for the New Year. Today, however, the traditional-style clothes have been replaced for most Chinese with new outfits in any style. Luxury brands like Gucci, Louis Vuitton, and Prada all pay close attention to this holiday.
With most Chinese buying themselves a new outfit leading up to CNY, there are lots of opportunities to capitalize as a retailer in the country. On the flip side, this also causes stocks of clothing in the country to plummet in the weeks leading up to CNY.
Effects of COVID on CNY in 2022
COVID has had a strong effect on China — so strong that authorities actively encouraged their population not to celebrate CNY in 2021. When the virus first was reported in China in 2020, factories across the country closed down, throwing a huge wrench in global manufacturing. While most factories have returned to operating at capacity on the surface, ongoing worker shortages have made it more difficult to meet order quotas.
While China has done a good job of containing the virus so far, CNY is one of the biggest annual mass migrations of people anywhere in the world — and the new omicron variant is much more contagious. If just a few cases manage to transmit undetected from the city to the countryside or vice versa, that spells trouble. China’s policy of totally locking down infected areas could quickly result in months of port or factory closures and delays.
Work with a logistics company that understands Chinese logistics (so you don’t have to)
You don’t need to enter the CNY season with your fingers crossed. As logistics specialists with experience navigating the Chinese New Year and its pitfalls, we think we have exactly what your business needs to make sure you start the new year off strong.
At CBIP, we’ve operated in China for nearly a decade and have a network of connections on the ground prepared for anything that comes your way. We’re always looking for innovative businesses like you that want an insider connection when taking on the Asian market.
That’s not all we can offer your business…
As a 4PL firm, we help you create a bespoke logistics service. We can do that because we don’t own our own ships and warehouses. Instead, we connect your business with our network of contacts based on your unique needs.
Want to change how your goods are warehoused or handled down the line? Unlike big providers like DHL, we can work with you to stay at the times and price points you want.
Interested in shipping adaptably this year? Fill out a form on our website and we’ll give you a call to tell you exactly what we can do for your business.