The Economic Impact of Chinese New Year

Published on Author norwoodkellyd18

As China gains more global economic influence, Chinese New Year has become more prominent and has a greater impact in international markets. During the holiday, Chinese factories rush to complete orders before they have to shut down, making it a headache for overseas retailers and importers that rely on China year round. Stock market trading slows. Trading volumes drop off considerably. Big companies in the US that have been doing business with China for years know to plan a year in advance for the next holiday season and even leverage their strong relationships with their contract manufacturers to ensure their orders are fulfilled prior to the new year.

Chinese New Year red envelopes (红包)

Lastly, because Chinese Lunar New Year never falls on the same date, the economic data for January and February can appear to have radically changed from the previous year. For example, last year, Chinese New Year fell on the last day of January which forced factories to rush orders out the door in a shorter amount of time. This year, with Chinese New Year falling in the middle of February, factories had more time to spread out orders. As a result, January’s trade data only appears to be weak. Most economists choose to wait until March to observe trends to avoid drawing incorrect conclusions about the world’s second biggest economy.

Other complications during the Chinese New Year comes from the fact that so many Chinese workers choose this time to look for and transition to new jobs. When manufacturers return from the holidays, it can take a week or so to get back to normal production given that factories need to train new employees on their lines and international buyers find themselves dealing with new sales teams.

Migration map during Chinese New Year 2015

The start of the holiday season begins the migration of hundreds of millions of workers traveling back to their hometowns, making the transportation and hospitality industries the lead beneficiaries of the season.

“The last few years – and this year is no exception – have witnessed an acceleration of Chinese visiting abroad, impacting international air travel and lodging. Other categories experiencing a positive impact are those in the personal gift giving space”, Brian Buchwald, CEO of Bomoda, a China-fovused consumer intelligence group.

This past year, the average Chinese transaction in Britain last year totaled to 739 pounds. In response, Britain’s Harrods started selling its own brand of red envelops (红包) traditionally used to give lucky money. Recent trends in spending around Chinese New Year suggest that with China’s ever weakening economy, middle to lower class Chinese are opting to stay close to home over the holiday and spending less and more wisely, keeping eyes open and going to extra length for the greatest discounts on gifts. In 2015, outbound tourist spending grew by a meager 1.5% compared to 16.5% in previous years.


8 Responses to The Economic Impact of Chinese New Year

  1. Many Chinese travel abroad during the Chinese New Year because luxury goods are far cheaper in places like Europe and the United States. China imposes a luxury tax on many items. As a result, goods such as designer handbags and jewelry can be up to 30% cheaper abroad. This increase in foreign shopping has caused many luxury brands to begin to tailor items to Chinese taste.

    Chan, Kelvin. “Chinese New Year and Its Effect on the World Economy – The Boston Globe.” Boston Globe, 18 Feb. 2015. Web.

    • This past year, foreigners purchased more than just luxury goods. With more than six million traveling to attend the Lunar New Year event, tourists spent a record-setting ninety billion yuan. However, rather than purchasing advanced technology, these tourists purchased everyday items such as condoms and toothbrushes. For example, the share price for for latex condoms rose 78% as many Japanese secured thinner condoms in bulk.

  2. It will be interesting to see how the tradition of traveling back to the hometown for the New Year holds up in light of continued migration to the industrial cities of the coast. As the Hessler book established, many of these rural towns are dying, relics of a formerly agricultural economy. Without young people coming back to supplement the local economy in the aforementioned hospitality and tourism sectors, the small towns might have their worst days ahead of them.

    It seems to be in the Chinese government’s best interest to encourage these New Years traditions, if just to keep money circulating through these rural economies.

    • It does seem as though the changing economic environment in China could be further polarized by evolving New Years traditions. As money is pushed around throughout urban China during the time, it may be increasingly difficult to move money into rural China. As we saw in class today, the agricultural part of the country gives a lot to non-agricultural China, but the reverse cannot be said. This is furthered by the increasing desire to travel to and purchase luxury/expensive goods from other countries (as JT mentions above). Yes, this is good for the international economy and China’s economic relationships with developed nations of the world, but like Zach points out, it seems like rural China resultantly finds itself in a state of even sharper decline.

  3. It is also interesting to note that the Lunar New Year noticeably impacts the U.S. economy, as well. During the 2013 LNY, the trade deficit with China fell from $20 to $15.2 billion: a trend reflected since 2007. Asia is an integral part of the U.S. economy, and though LNY is not a nationally recognized holiday in America yet, it will not be surprising if that changes in the coming years.

  4. Chinese new year does have a huge impact on Chinese economy. Specifically this year, the new year break actually falls between February and March, instead of normally between January and February. And this fact has been used by Chinese government as well as economists to explain the slower in economic growth for the season. They argue that normally when the new year break falls between January and February, there will be a boost economy in March. However, since this year, the Chinese new year is so late, it’s kind of the reverse story. Chinese economists use this explanation to reassure investors overseas. However, do they believe in it is a whole other story.

  5. Another thing that helped with the economy during the Chinese New Year in past few years is the rise of electronic red envelopes from one of the most popular app called “WeChat”. “WeChat introduced the red envelope service in 2014, resulting in more than 20 million envelopes being sent within 48 hours. More than 121,000 envelopes were sent within a five minute period during its busiest point, the company said at the time”.


  6. Electronic red envelopes!! – well, I can recharge phones of Baptist pastors in the mountains of the northern rural Philippines from my laptop, so I suppose there’s nothing strange in that, but somehow getting handed an envelope had a certain tangibility that I’d miss. (Yes, a couple elderly relatives when I was growing up would only put in $3 or $5, but it was still a useful and personal present from someone unable to shop.)

    Now transportation patterns are helpful in gauging the extent to which the “Lewis Turning Point” has been reached, where going from the interior to the coast is no longer sensible. Of course part of this is a regional realignment, but part is migration that’s fully severed those who left years back from their natal villages, and rural opportunities that make migrating a long distance a losing proposition.

    The data are out there, though I’ve no inkling of how to access them.