Business Tips for 2021 China New Year holidays
Business Tips for 2021 China New Year holidays – Thankfully, the year of the Rat will be ending in February 2021 and then it will become the year of the Ox. 2020 has been a significant challenge for many firms who are sourcing from or exporting to China. Covid Lockdowns and the shortage of shipping have made the rat year an unforgettable one in business challenges. This article will offer tips and guidance on reducing the risks of shipping delays or product shortages during the Chinese holiday season. The categories of companies who may be experience Chinese New Year issues are:
1. Firms Exporting Goods to China
2. Firms Importing Goods from China
1. Firms Exporting Goods to China
Normally, exporters to China, particularly those who export foods or branded goods, experience a surge in demand for their products. Exporters can face all types of questions from customers and late changes to any orders placed. In 2021, this is expected to be even more challenging as it will be tough to forecast sales for China and offer a transport solution to China which will meet this demand.
Below are three areas where you might experience issues in the run-up to the Chinese New Year Holidays:
1. Increased demands and lack of patience from your buyers in China.
2. Transporting goods to China.
3. Getting payment from your buyers in China.
1. Increased demands and lack of patience from your buyers in China
2020, brought a lockdown, travel restrictions and global recessions. China has been dramatically affected by this. Many factories have experienced a massive fall in international demand for their products. Many importers have faced a fall in orders from the domestic market in China.
Exporters China are struggling to determine what volumes are required for this market as the pandemic affects the market. The continued growth in eCommerce sales has intensified as people were restricted to their homes due to the pandemic. This increase in eCommerce sales was unplanned by many firms, and logistics companies, which can frustrate the buyers in China who may experience stock-outs or delivery delays.
In our experience, we have found that China Call Centre services experience a peek demand in Chinese buyers’ calls in the run-up to the holidays.
The best approaches to supporting your Chinese buyers for the New Year holidays are as follows:
1. Please discuss with your buyers in China early as possible about their order requirements and delivery dates in the run-up to the Chinese New Year holidays.
2. Create China eCommerce team plan and put in processes to deal with any surge in eCommerce sales in China. Here is a fascinating China eCommerce article which I previously wrote.
3. Bring in additional China customer support cover for your buyers in China. Clients are increasingly using Goodada’s China Call Centre services to provide this extra cover.
4. Keep an eye on prices and keep updating the costs to your Chinese buyer. It will avoid payment disputes with your buyer in China.
2. Transporting Goods to China
Goods which are shipped into China
There is currently a massive shortage of shipping containers, and many firms are struggling to get their goods exported to China. The Chinese new year is the 12th of February 2021. It would be best if you were aiming to have the products arrive at the docks in China by the 30th of January 2020. It is a hectic time at the ports in China, so having your goods land into China early will avoid your goods being stuck at the port over the Chinese holiday period.
Goods which are flown into China
There currently is a massive shortage of airfreight space. The pandemic has all but eliminated passenger aircraft routes which have led to shortages in airfreight. Your relationship with your freight company is very important as they can work hard to find space for your goods. It is not the time to be looking for the lowest price as the challenge is to find space.
3. Getting payment from your buyers in China.
A lot of Chinese companies are struggling at the moment. They will also have extra pressures on their cash flow as they need to pay bonuses to their staff, pay tax to the Chinese government and pay any financing costs to shadow lenders. It is strongly advised not to offer any additional payment terms unless your company has credit insurance covering any additional payment terms.
2. Firms Importing Goods from China
The effects of Covid has brought extra pressures to those firms importing products from China. The Chinese New Year Holidays will bring added stress to these firms supply chains in the following areas:
1. The Seller in China
2. The transportation of your goods from China
1. The Seller in China
When planning to navigate through the challenge which the Chinese New Year holidays bring to a supply chain, firms need to break the plan into two sections:
a. The China Seller BEFORE the Chinese New Year Holidays begins.
b. The China Seller AFTER the Chinese New Year Holidays has ended.
a. The China Seller BEFORE the Chinese New Year Holidays begins
During the run-up to the holidays, companies may start to experience issues with their Chinese sellers. These issues can include:
- A fall in the quality of their product and increased negative customer feedback.
- No flexibility with the seller in China to amend any order which has been placed.
- The Chinese seller may seek payment upfront or reduce credit terms.
- An increase in the purchase price for the products from China.
The above instances can confuse many international firms, so it is worth examining the potential causes of the above actions:
- Generally, workers employment contracts with factories come to an end at the start of the Chinese holidays. If the worker has decided that they want to move to a new employer, their focus on producing a high-quality product may not be of high importance.
- Bonuses are paid at this time of year. If workers feel aggrieved over the bonus payment they have received from their employers, they will tend to channel this displeasure through the products made for their employer’s customers.
- The China seller may change payment terms as they have to make additional payments during this time of year such as extra staff wages, staff bonuses, raw material payments and Chinese tax payments.
- For busy factories with no spare capacity, they might outsource the production to other third-party factories where quality control standards may not be as stringent.
- Some scrupulous Chinese sellers know that their customers have no alternative supplier. They know that these customers will have no option but to accept the increased prices which they impose.
b. The China Seller AFTER the Chinese New Year Holidays has ended.
As with most firms worldwide, your seller in China may experience staff shortages and may face delays in hiring new staff. Many Chinese firms have told me that they require up to three months to bring their labour force back up to full production capacity.
A shortage of labour with a seller in China may instigate the following actions:
- Chinese sellers becoming unwilling to accept any new orders from your company.
- Overruns in the timeline to manufacturer your products. Production times can increase by over 25% during this time. The Covid crises may further exacerbate this issue.
- Delays in receiving updated prices for your products – Chinese sellers may have to wait on their suppliers, providing them with updated prices for any parts or materials used to make the products you source.
- Inferior quality products – Sellers may not have adequately trained any new staff, which can cause a fall in the standards and quality of the output.**Tip** – You should use Goodada’s Inspection services here so that your product quality is maintained.
2. The transportation of your goods from China
Shipments out of China are currently facing massive delays. Goods are waiting for weeks to be shipped out of China. Please read my recent article for an update on shipping and the issues which it is facing.
11 Business Tips for China 2021– How to Reduce Costs and Avoid Stock Outs
For Firms exporting Goods to China – Business Tips for China 2021
- Confirm with your buyer the dates that your goods are required to be in China and then reduce the date by up to 20 days. This extended timeline is necessary to cope with the shortage of transport options due to Covid.
- Get your transport company to provide regularly updated prices and commit to delivering the goods to match your deadlines.
- Seek payments from the buyers in China before the holidays. Banks are often closed, and sometimes buyers don’t reopen after the holidays!
- Use the services of a Call Centre company based in China, such as Goodada’s China Call Centre Services to provide additional customer support to your buyers in China during busy times.
For Firms Importing Goods from China – Business Tips for China 2021
- Create a timeline from the 1st of January 2021 until the 9th of April 2021 and call it the “China Supply Chain Disruption”. During this timeline, be prepared for all types of issues to arise.
- Build up stock reserves of critical products in your warehouse. The rule of thumb is to have 12 weeks of stock to cover you commencing from the 8th of February 2021.
- Place increased orders with your non-Chinese suppliers. Please note that countries such as Vietnam also celebrate their new year holidays during this time.**Tip- Search for new Sellers on goodada.com**
- Ensure that all your goods are shipped eight weeks before the commencement of the Chinese New Year holidays to try and get space on any of the ships.
- Avoid your products being stuck at a port in China. Make sure that all the goods have left your Chinese seller four weeks before the factory closing.
- Avoid product quality issues by allocating additional funds for independent Inspection companies. **Tip – use Goodada Inspection Services.**
- Use the inspection company to communicate with new staff that commence working in the factory after the Chinese Holidays. Often the inspector can add another voice to aid the training of these new staff.
About the author – Business Tips for China 2021
Aidan Conaty ACMA, GCMA, MBA, is the founder of TCI China and Goodada.com. Aidan has spent over 15 years assisting companies to trade internationally. TCI China provides trade support services for China. Goodada helps companies to sell globally. Trinity College Dublin awarded Aidan the Seamus McDermott MBA scholarship.
Aidan can be contacted email at aidan@goodada.com or at:
(Europe/ Rest of the World) +353 1 885 3919
(UK) +44.020.3287.2990
(North America) +1.518.290.6604