Does Chinese New Year Have Any Impact on the Economy of the Western World?

Does Chinese New Year have any impact on the economy of the Western World?

Introduction/Context

The Chinese New Year, also known as the Spring Festival, is an annual festival which marks the start of a new Luna cycle on the Chinese calendar. The celebration lasts for 15 days, with the first day of the new cycle falling between January 21st and February 20th. This is the time of the year where Chinese families reunite for various events. The reunion dinner is the most important occasion, where family members from all over the country are invited to gather together in one place to celebrate the festival.

After large amounts of Chinese citizens settle around the globe, the prestigious Chinese culture followed. The spring festival is now a universally recognised occasion for the global Chinese population. The integration of Chinese culture naturally led to money-making opportunities for the Western world. Traditional Chinese cuisine that are usually served during the 15-day celebration, have now become a local feature, and served in restaurants over the world, inserted into the domestic normality. Best examples being dumplings, wontons and dim-sims are now sold in all restaurants that cater the Chinese feature. The west has also exploited the desirability of this fresh culture to further expand their markets in many industries including fashion and entertainment, with food being the most significant.

Argument/s

This essay will aim to argue that the Chinese New Year, as an event, has had, and will continue to have significant economic effect on the rest of the world. It is an occasion that brings families together, even if they are separated by sea. Also, more importantly, an event that has opened welcoming doors for those that wish to experience the history and the beauty behind the culture. In spite of this event having kept a seemingly strictly culturally oriented identity, it has made its mark on other cultures as it is also a public holiday in other southern Asian countries like Singapore and Malaysia etc, and in other countries, ‘some businesses would close early, and some streets are closed to allow for festivities and parade,’ demonstrating the gravity of its influence on business operations.

Explanation of how the evidence will be presented

To provide supporting argument for my research question, I will discuss 3 points. First being, the significant effect it can have on businesses in the manufacturing industry. Second, how the global economy can be affected during that period, as the world trading numbers takes a sharp decline due to the lack of vacant workers. The last point I will cover is that, in the modern western world, from your local retail businesses, to big name European luxury fashion brands, recognising the concept of celebrating the Chinese New Year, and how they can use it to explore further marketing opportunities.

Explanation & Evidence (Body of Essay)

The first point I will elaborate on is how the Spring Festival has the realistic possibility to significantly affect a business, particularly manufacturing businesses, during the time of the celebration. The emphasis this event has on people, particularly the customers of these businesses are affected due to the migration of large amounts of Chinese workers who request to return home. As that takes place, those businesses have no choice, but to consider Chinese New Year as to make sure have stored enough product to last until the end of the festival.

Chinese factories shut down for the holiday and more, extremely large amounts of Chinese migrant workers returning to their hometown, all being a part of the world’s biggest mass movement of people, reaching the number of 2.9 billion times of travel in total. In the preparation for the upcoming holidays, factories run flat out to fill orders before shutting. Not only is the lack of workforce a problem during the festival, workers start setting off as much as two weeks prior to the first day of the Chinese New Year onto just-about full trains and buses. After the holiday they may take the same amount of time to return, or not. The holiday is a prime occasion to switch jobs. (Chan, 2015)

As factories resume production, they often struggle to work at full capacity as they are still missing a large amount of the original employees. Sometimes factories recommence manufacture with only 35% of the workforce back, as mentioned in the evidence above, the Chinese New Year’s holidays is the climax of job changers. Unfortunately for manufacturers, depending on the trend of the labor market, some of those employees possibly will never return. This uncertainty is the most significant out of the many problems Chinese factories face after the Spring Festival. Given, the development of the labor market is currently decided by the workers, and large numbers do not consider returning as they explore and discover opportunities nearer to home or more profitable ones. This fact indicates that each year the factory drops considerable portions of its workforce and its essential to fill the void, but more importantly train the employees to avoid potential quality issues. This, along with the excessiveness of back-orders received during the Spring Festival, increases the amount of time needed for manufacture. Something that also need to be noted is that some suppliers, including the ones that are not as occupied, takes advantage of this and uses the Chinese New Year as a justification for below average production rates. The larger factories, who are working at its maximum capability however, may subcontract to smaller factories to reach minimum requirements. Quality of the product may become an issue.  As the smaller-sized factories do not typically have the same quality measure processes to mirror the product quality or efficiency of the larger factories. One more important factor that possibly caused the decline of production rate is the shortage of raw materials as raw material suppliers have their own backlog and hence factories cannot proceed with the production until they get these materials. (Chitayat, 2018)

The Chinese New Year also causes the economy as global trading numbers plummet during the 15-day period. Stock market trading comes to almost a complete halt as most mainland China industries shuts down for an entire week and financial powerhouses such as Hong Kong and Singapore also enters holiday mode. Numerous other smaller surrounding countries, including South Korea and Vietnam, also applies Lunar New Year holidays. Even the Muslim majority South-east Asian countries like Malaysia and Indonesia, with large Chinese minorities, take holidays too. Lost productivity from workers caught up in the festivities will disrupt trade flows from Latin America to Africa and the Middle East. This global celebration is also becoming a greater challenge for U.S. businesses with each passing year, therefore effecting the whole world’s manufacturing economy.

Trading volumes experiences a large drop around three business days before the commencement of the holiday, said Andrew Sullivan, who happens to be the 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 the trading settlement rules, he said. Foreign stockholders also tend to pull back on trading in the Asia region as the festival approaches, Sullivan added. (Chan, 2015)

Over the past few decades, many western countries have attempted to utilize the potential of the growing influence of Asian culture, by establishing places now identified as Chinatown that not only cater to all Asian cultures but also are the prime ground for successful Asian-owned businesses and organizations. Majority of larger scale American companies, also numerous smaller corporations, acknowledges the power and influence of China and have dedicated a significant amount of time and resources on developing trade partnerships throughout the region.

American retail brands such as the Macy’s and The Container Store have also been forced to make changes to their operational supply chains to make sure they do not run out empty of product supplies while their suppliers are celebrating Chinese New Year. Fascinatingly, numbers from the Department of Commerce indicates that it is also the best time of year for the U.S. to cut the trade deficit with China. Last year’s Luna New Year data demonstrated that the trade deficit with China fell from $20 billion in January to $15.2 billion in February when the festival takes place. Since 2007, the first quarter of the year often displayed the narrowest trade gap of the year between the two global powers. The Super Bowl, celebrated as an unofficial American national holiday, falls a long way short with its approximately $820 million a year in lost productivity. (Huang, 2013)

Additionally, businesses have adapted and started to utilise on the Chinese practice where one must start the new year with something new. Second, this adaptation of Chinese culture by businesses, suggests the idea that businesses would incorporate products related to the Spring Festival. Items such as red packets(红包(s))has been produced by big name western brands, as an instrument to showcase their engagement with the Chinese spirit, and the acknowledgement of the culture of Chinese buyers.

A local example demonstrates this the best. Our local Australian retail company released an ad in February 2018 (Norman), promoting a sale in the theme of celebrating the Luna New Year. This indicates that western companies have already not only acknowledged the Chinese culture, but also adapted and utilised it to their own benefit. They understand that the idea of being associated with a non-domestic theme will attract the interest of the locals, out of pure human curiosity. On top that, throwing a sweet discount deal on the product, will naturally increase the sale numbers.

There are more luxurious examples, and the most significant would be well-known designer companies around the globe being engaged in producing designer red packets. World class fashion companies like Tiffany & Co. and Valentino etc. recognised this opportunity to show their allegiance to the Eastern culture and to further explore possibilities in the Asian market, produced luxuriously designed red packets. Style Magazine released a compilation just before the 2018 Spring Festival, of the 15 best designer themed red packets, and both companies were featured in the top 5, with many other well-known European companies globally also taking part. (Tie, 2018) This assures that not only local businesses for the average civilian are noticing, the larger luxury brands that rake in billions daily, are appreciating and integrating the concept of the Chinese New Year and recognizes it as a prime marketing opportunity.

Conclusion

The evidence presented above has clearly explained how the Chinese New Year has not only gained recognition from the western world, but it has also been integrated into a part of the local normality. In the modern era, not only do the west realise that China has become a global powerhouse nation, who deserves broad recognition, but also the economic effects that the Chinese culture can inflict on the world’s way of functioning. The Chinese New Year, although not being celebrated by all, has no doubt, generated a ripple effect on the globe especially due to the current reliance the modern world has on the role of China. Sooner or later, the Luna New Year may just become a universal holiday.

Bibliography

       Chitayat, D. (2018). How does the Chinese New Year impact Manufacturing? – GENIMEX. [online] GENIMEX. Available at: http://www.genimexgroup.com/blog/manufacturing-in-china/chinese-new-year-impact-manufacturing/ [Accessed 14 Nov. 2018]

       Chan, K. (2018). Chinese New Year and its effect on the world economy – The Boston Globe. [online] BostonGlobe.com. Available at: https://www.bostonglobe.com/business/2015/02/18/chinese-new-year-and-its-effect-world-economy/0HgwjHXjCODvwNdJXZdNQI/story.html [Accessed 14 Nov. 2018].

       Harvey Norman (2018). Harvey Norman Lunar New Year Sale – 9th – 16th Feb. Available at: https://www.youtube.com/watch?v=NYkI0EZ5wOQ&feature=youtu.be [Accessed 14 Nov. 2018].

       Huang, j. (2018). Lunar New Year festivities impact world economy: Column. [online] Usatoday.com. Available at: https://www.usatoday.com/story/opinion/2013/02/07/lunar-new-year-column/1899533/ [Accessed 14 Nov. 2018].

       Tie, A. (2018). Top 15 luxury red envelopes for Lunar New Year 2018. [online] South China Morning Post. Available at: https://www.scmp.com/magazines/style/people-events/article/2132581/top-15-luxury-red-envelopes-lunar-new-year-2018 [Accessed 14 Nov. 2018].