Chinese New Year, The Spring Festival, would have to be one of the most significant dates in the calendars of importers and exporters and it approaches fast on the heels of the Western holiday season.
China starts its annual near-total shutdown around mid January to early-mid February, and with the vast movement of over 1.3 billion people making their way from their place of work to their familial homes (perhaps the largest annual human migration in the world), it is little wonder why Chinese New Year can have a very significant impact on business owners trading with Chinese suppliers, but including those trading with Chinese suppliers in overseas countries.
Almost everything relating to the operation of a business is impacted, from payments, accounts receivable, ordering, freight, customs processing and even business travel and accommodation. It is a challenging time to be doing business.
To help you plan for and navigate through this period, Tradeline have produced some general recommendations:
- Ensure you are stocked up – Place orders well in advance to ensure they are landed, cleared and ready for sale from mid-January, bearing in mind that many importers will also be looking to secure stock at this time. Ensure you can accommodate increases to normal inventory levels. In calculating your inventory requirements, also be aware that manufacturing may take time to reach peak again following the end of the festivities.
- Ensure you order earlier than usual anticipating that Chinese factories will be running at peak before the shut down. This may sometimes cause quality issues which can in themselves be highly disruptive, so ensure you maintain your usual monitoring and quality assurance standards at this time. It can be best to over-communicate with suppliers through this period to minimise the risk of surprises.
- There may be bottlenecks at the shipping and logistics phases of the sale, so ensure that shipments are booked and stock is delivered well in advance of the shipping date. Most Chinese ports will be closed completely or operating at limited capacity at this time, so it is highly preferable that shipments avoid this timeframe. Even the nation’s roads and highways can get clogged up as people return home for the festivities.
- Ensure you have funding in place to order goods quickly. Tradeline can provide a purchasing facility of up to 90% of the value of the purchase, with flexible repayment terms of 30, 45 or 60 days.
- Ensure there is a strong focus on cash flow management in the lead up to this period, so there is sufficient working capital available to absorb any shocks and shortfalls.
- Be on the lookout for any government announcements at this time, as with the nation focussed on family and celebrations this is potentially when adverse changes may be announced.
- Ensure any outstanding payments are made prior to the official holiday, as no payment processing to or from Mainland China or Hong Kong occurs during this time.
- Consider a symbolic gesture at this time to demonstrate your understanding of local practices and help develop stronger relationships with your vital suppliers.
Even with strong cash flow management, China trade can be highly unpredictable. Tradeline from Scottish Pacific can provide fast and easy access to funding for purchases from overseas (or local) suppliers and flexible repayment terms and limits up to 90% of the value of the purchase. For more information please visit www.sptradeline.com.au or should you have any clients which may need cash flow or funding support for purchases around this time, contact your Business Development Manager who can assist you with structuring a facility.