The Impact of the Chinese New Year On Domestic Consumer Activity

According to data on the website of the Swiss Federal Customs Information, gold exports to China from major producer Switzerland skyrocketed in December of 2016, with more exports than any other month since January 2014. Given that China is consistently one of the world’s top gold consumers, this may not seem entirely unusual. However, it might have been preparation for the recent Chinese New Year, which brought in the Year of the Rooster, that was responsible for the spike in gold purchases.

The beginning of the Year of the Rooster, which began on January 28th, is commonly associated with gifting gold, which, along with lower prices at the tail end of 2016, led to the increased demand for the precious metal. The rooster is one of the 12 rotating animals on the Chinese zodiac.

The massive spike in gold exports to China is based upon consumers’ interpretation of the zodiac. However, the Chinese New Year brings plenty of other major rifts in Chinese consumer activity.

Travel, especially in groups or with families, rises significantly in China during the holiday season. According to ForwardKeys, a firm that predicts future travel patterns and analyzes over 16 million booking transactions a day, there was an 18% rise in bookings made by families of up to four members for travel during this holiday season compared to last year (as of December 30, 2016). While most Chinese travelers prefer Asian destinations, Europe is becoming a more popular hub for Chinese tourism in the holiday season; bookings for travel to Europe were up by 56% over the New Year.

The spike in tourism during the Chinese New Year carries a hefty price tag; According to research by the China National Tourism Administration and Ctrip (a Chinese travel company) spending projections are about 100 billion yuan (US$14.5 billion) this New Year fpr around six million Chinese traveling outside the country. Last year’s holiday period saw an economic impact of 90 billion yuan from overseas travel by 5.2 million Chinese,

The new year also carries weight for factory workers, as Chinese factories shut down for the holiday, with hundreds of millions of migrant workers heading to their hometowns. In the lead up to the holiday, factories run flat out to fill orders before shutting, but workers start setting off as much as two weeks earlier on packed 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.

This can be unnerving for retailers and importers overseas who rely on China. Shipping companies warn customers that China’s transport networks are at capacity during the holiday and that shipments need to be ready well before the nation-wide shutdown begins.

Between the arbitrary influence of the zodiac and the actions of consumers in preparation for the holiday, the Chinese New Year has a far-reaching effect on both the Chinese and world economy.

 

Sources consulted:

https://www.bloomberg.com/news/articles/2017-01-26/china-s-gold-imports-from-hong-kong-rise-as-lunar-new-year-looms

https://www.bostonglobe.com/business/2015/02/18/chinese-new-year-and-its-effect-world-economy/0HgwjHXjCODvwNdJXZdNQI/story.html

http://www.forbes.com/sites/hamdiraini/2017/01/24/chinese-new-year-travel-trends-to-look-out-for-in-2017/2/#7a9229557695

 

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14 Responses to The Impact of the Chinese New Year On Domestic Consumer Activity

  1. choia18 says:

    It’s amazing to see how much a holiday influence’s consumer demand, now on a much more global scale. A similar example of demand increase like this one is Christmas time in Japan. Japan’s KFC ran a marketing campaign in 1974 called “Kurisumasu ni wa kentakkii!” (Kentucky for Christmas!). Even though only one percent of the Japanese are estimated to be Christian, Japan’s KFC sees the most sales volume on Christmas eve thanks to this event. For $40, one can buy a Christmas Chicken Dinner that even comes with cake and champagne.

    Christmas may not be considered a holiday in Japan but the fact one day in the entire year can cause an entire nation to act in unanimous synchornization is impressive. As Mattew’s article indicates, Chinese New Year is no exception and can cause a nation-wide shutdown for the single event.

  2. march zheng says:

    With a holiday as culturally imprinted as Chinese New Years, it is hard for work efficiency to be maintained at those times. I believe that this is a cultural phenomena that economies need to prepare for, as the impact of this holiday means more than just economic efficiency. As for consumer demand, I see it similar to Black Friday in America etc, which are simply windows of opportunities for companies to exploit. Maybe in the future, the shutting down of factories around those times need to have a better system implemented.

  3. sackettm18 says:

    It seems that as China becomes more globalized, and the growing number of Chinese emigrants (9.5 million since 1978) spread their culture around the world, the Spring Festival becomes a global event, much like the West’s Christmas holiday season. In one Economist article I read, the New Year festival can be a chance to reclaim Chinese holiday heritage from the growing popularity of Western holidays in east Asia.

    Economist article :http://www.economist.com/news/china/21715707-government-wants-foreigners-celebrate-too-chinas-biggest-festival-going-global

  4. gristt18 says:

    One wonders the massive effects such observance of holidays and cultural traditions has on the economy. For example, many young Chinese return home for the Chinese New Year in a reversal of the Great Migration Hessler described. As the economy has slowed, however, we may see many migrants deciding to stay in the countryside as the cost of living in cities grows. With regulation on emissions in the near future, factories will start to shut down, companies will ship jobs to Cambodia or Vietnam, and migrants may return home where the cost of living is much cheaper and familial ties remain strong.

    Sources:
    http://www.telegraph.co.uk/news/2017/01/29/chinese-new-year-workers-travel-home-final-time-chinas-big-cities/

  5. tylerc18 says:

    According to Fortune, 2015 was the weakest China’s economy has been in the last 25 years. The article’s main subject, Bing Chen, decided to stay home last year. In 2015, tourist volume in Hong Kong from the mainland dropped 15.5% compared to 2014 levels. Chen is a manufacturer, and perhaps a shift away from industry reflects his motives. Instead of focusing on the seasonal spike during the holidays, it would be interesting to study the seasonal data over the last twenty or so years. This comparative study could be enlightening as to whether tourism and travel has fallen as China changes its course toward a service-driven economy.

    http://fortune.com/2016/02/09/china-new-year-tourism/

    • Alden Schade says:

      Maybe this is an opportunity for a travel and tourism-oriented service business. Perhaps over the next few years and industry of organizing travel during the hectic New Year period will become a lucrative business as Chinese entrepreneurs recognize this potential service business opportunity.

      • the prof says:

        It already is a major industry inside China. I get a biweekly newsletter from a tourism entrepreneur in Japan, lots of business adapting marketing to reach Chinese tourists, and providing infrastructure to make their stay in Japan fulfilling and full of purchases. You can see this in any international airport: the duty free shops all have Chinese staff.

  6. feldsteinp18 says:

    It is interesting to see the short term effects of the Chinese New Year on the Chinese and Global economy but I would assume that these are largely seen only in the short term. Because of the short duration of the holiday, I would assume that Gold prices would return to previous levels after the Chinese buying spree subsides. Similarly, because it does not create widespread and long lasting change in the Chinese economy it seems that changes seem are shocks and not permanent changes. It would be interesting though to compare the Chinese New Year’s effect on Chinese GDP to Christmas and the US. Many US companies prosper the most in the holiday season, it would be interesting to see if this is the same in China.

  7. knapkes18 says:

    I think the uncertainty surrounding migrant workers return home for the holiday is an interesting concept. The idea that Chinese factories worry about losing a chunk of their workforce over the New Year celebration period and the effect that can have on the global economy is a testament to the current importance of Chinese manufacturing across the globe. However, it remains to be seen if this effect will continue into the future. China’s economy is slowing, especially in manufacturing. With the rise of manufacturing economies in southeast Asia, China’s manufacturing sector will continue to slow possibly mitigating the effects of the Chinese New Year on the global economy.

  8. bonesc18 says:

    At first I was thinking I wanted to see a comparison of the Chinese New Year and other country specific holidays like the 4th of July or Tet in Vietnam, however I don’t think a fair comparison really exists. I don’t think any other holiday has the power to drive gold exports, tourism, manufacturing, imports, you name it. Peter, I’m really glad you chose to write about this, because it’s really something I never would have thought of.

    For the sake of some comparison to really see the impact, I would love to look at the impact of the Chinese New Year judged against economic conditions at the time. Is it always going to have this explosive effect? Did it have more when the Chinese economy was growing at a greater rate? Are other years less profitable than ones where gold giving is not the norm?

  9. masonw17 says:

    I think this article brings up some interesting points about the role of culture in the economic sphere. I’m particularly thinking about Christmas being a huge shopping season in the US, driven at least in part by a coordinated effort by retailers to ‘sell the season’. I wonder if the evidence you’re outlining above indicates that as the Chinese consumer market continues to boom, a similar pivot is occurring in Chinese culture towards a ‘commodification’ of traditions previously independent of the consumer market

  10. the prof says:

    This is one instance of a general problem in looking at data: seasonal patterns. H. Parker Willis, the first Dean of what is now the WIlliams School over a century ago help set up the Federal Reserve System to deal with the swings in interest rates stemming from the agricultural cycle. Harvest time no longer dominate changes in the US, but there are many, many other seasonal factors. If you look at FRED you’ll find many series available NSA (not) and SA (seasonally adjusted). Simple approaches make comparisons to the same month a year earlier, but (for example) some months have 5 weekends one year, 4 the next. The BLS has software you can download that factors in not just the number of Saturdays but also the timing of legal holidays (especially when they lead to extended weekends).

    In China, analysts tend to add sales data for January and February: the Lunar New Year always falls somewhere in that interval, but exactly when it falls varies enough to make year-to-year comparisons of January to January uninformative.

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