The year of the water snake starts on February 10 in China. The new year holiday officially lasts six days, but many workers go on leave for up to a month. What does the holiday mood in China mean for the world?
Chinese lunar holiday significantly impacts global trade because China is not only world’s largest exporter but also set to become the largest importer by next year.
Historical data show that Chinese factories close or slow operations for a couple of weeks around the lunar new year holiday and the demand for raw materials dries up.
Asian countries and Australia are among the most affected.
Commodity trade, which thrives mainly on Chinese demand, bears the brunt. But the impact may vary for different metals. Thus, on the one hand, most consumers of refined copper in China, the world’s largest consumer of the metal, will put off spot purchases and wait for the factories to re-open after lunar new year celebrations. On the other hand, spot iron ore price hit a three-week high on Tuesday as Chinese steel mills increased their purchases ahead of next week’s new year holiday.
China accounts for more than 20 percent of total demand for gold jewellery. Gold sales are expected to increase during the new year celebrations as China has been encouraging citizens to buy gold as jewellery or bullion.
China’s holiday indulgences have a strong impact on manufacturers worldwide. Luxury goods makers look forward to this annual self-indulgence by the Chinese consumers. Last year, Chinese holiday shoppers splurged less than expected. Beauty brands felt the pinch most. This year, the austerity diktat is expected to hit sales of luxury cars and high-end goods, which usually see an increase in this period.
Chinese new year has been an event for US companies, especially for their stores in China and rest of Asia. But this year chains like Bloomingdale’s and retailers Dior, Swarovski and even Starbucks are targeting Chinese new year shoppers in the US.
The holiday also means there are fewer Chinese globetrotters. The Chinese travelers are world’s biggest spenders, just ahead of Germans, splurging $91 billion, according to a study. Higher air fares and shortage of train domestic air tickets within China deters foreigners from visiting China. Many expats working in China leave the country during the period.
The after-effects of the holiday are felt for weeks after the vacations are over, as many workers who go on leave never come back. With China being the factory of the world, global giants with manufacturing facilities there get impacted.
Even the Chinese stock markets feel the so-called Chinese New Year Effect. The bull-run in the equities market starts in January and runs its course till May. The behaviour is attributed to the centuries old practice of getting rid of the old and splurging on new purchases in the new year.
The bingeing of consumers acts as a stimulus for the domestic economy. But the long period of people not working in the world’s second-largest economy and the unpredictability is a bit of a bother for business plans of the rest of the world.
