Chinese New Year (or the more politically correct Lunar New Year) is the one time each year virtually everything comes to a grinding halt many parts of Asia (and particularly China). The Chinese New Year (CNY) is the traditional beginning of the Chinese calendar and creates the largest global migration of workers going to and from southern China to see family and friends.
There are a surprising number of holidays in China (and even more in Hong Kong), but CNY is the only time most factories in the mainland are closed. Depending on the level of factory backlog (or lack thereof), this shut-down can last for two weeks or longer. In reality, however, since many factory workers in southern China migrate to their homes in northern and middle China and leave before and come back after the holiday (the journey takes several days each way and train tickets are more expensive the closer to the actual holiday), some factories are virtually closed for the entire month around CNY.
CNY is also the traditional time of change in China. A time to clean, refresh, or restart. So, a number of workers (20-30% in some cases) don't come back to the factory they left. They may stay in their home area, change jobs, get married or make other life changes. So, factory owners are left with, to some degree, a guessing game of how many workers they may have after CNY. And this puts the end user of those factories in the US and Europe in a similar limbo.
This year is even a larger guessing game due to the changing labor and population demographic patterns in southern China, regional economic development in middle and northern China, and an improving, but still uncertain, global economy.
Many factories will start reopening over the next week; smart importers usually schedule Asia visits around this time to see what capacity and experienced worker changes have occurred. The whole supply chain system takes another couple of weeks (at least) to get a good, consistent flow of production and shipping going.
Like the European summer holiday factory shut-downs, importers learn to adjust for the break in production. On the positive side, this is the only time most factory workers have to see family and friends. And many return with rested and tired of village life. And the cycle starts again.
The take-aways: CNY is a time of renewal and family in Asia, offset by stressed out importers in the west who have to learn to live in temporary limbo.
More to follow...
*Happy New Year!
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