How to avoid trade issues with China during its New Year Celebrations –The year of the dog (2018) is coming to a close and 2019 will ring in the year of the Pig. For most companies who are selling into or buying from China this time of year can bring a lot of stress across their China Supply Chain. The categories of companies who may be experience Chinese New Year issues are:
1. Companies Selling Products into China
2. Companies Souring Products from China
1. Companies Selling Products into China -Avoid trade issues with China
As buyers in China prepare to meet the increased in demand from their customers for your products it can be a very stressful time for them. You should be prepared for all types of questions and also for late changes to any orders which have been placed with your company.
Below are three areas where you might experience issues in the run up to the Chinese New Year Holidays:
1. Increased demands and lack of patience from your buyers in China.
2. Organizing Transport and Customs clearance for your product to China.
3. Getting payment from your buyers in China.
1. Increased demands and lack of patience from your buyers in China
Buyers in China especially those who are selling new products into the Chinese market may not have any purchasing history to base their Chinese New Year Orders on. This means that you as a supplier are expected to have goods ready and immediately available for shipment out to China when requested by the buyer. This may cause tensions with buyers in China as they may not fully understand the production processes and stock levels of your products.
In our experience, we have found that China Call Center services experience a peek demand in calls from Chinese buyers in the run up to the holidays.
The best approaches to supporting your Chinese buyers for the New Year holidays are as follows:
- Discuss with your buyers in China from early as September about their order requirements and delivery dates in the run up to the Chinese New Year holidays.
- Bring in additional China customer support cover for your buyers in China. Goodada’s China Call Center services are increasingly being used by clients to provide this additional cover.
- Keep an eye on prices and keep updating the prices to your Chinese buyer. This will avoid payment disputes with your buyer in China.
2. Organizing Transport and Customs clearance for your product to China
Goods which are shipped into China
For goods which are being shipped to China, you should be aiming to have the goods land into the ports in China by the 22nd of January 2019. This is a very busy time at the ports in China so having your goods land into China early will avoid your goods being stuck at the port over the Chinese holiday period.
Goods which are flown into China
The key challenge is getting space on the flights for your goods during these peak times. It is vital that you have a good relationship with your logistics company. During peak times where space is scarce on airplanes it will be your relationship with the logistics company which will ensure they will prevent your goods from being left behind at the departure airport.
3. Getting payment from your buyers in China.
This time of year buyers in China have extra demands on their cash flow as they need to pay extra wages to their staff, pay tax to the Chinese government and pay any financing costs to shadow lenders. Some buyers in China, unable to pay for the products which they purchase, might ask for payment terms or payment extension periods.
It is strongly advised not to offer any additional payment terms, unless your company has credit insurance which covers any additional payment terms.
2. Companies Souring Products from China – Avoiding trade issues with China during its New Year Celebrations
To reduce the risk of issues when sourcing from China during the Chinese New Year holiday period the following areas need to be considered:
1. Your Supplier in China
2. The transport of your goods from China
1. Your Supplier in China
In assessing if there are any potential issues, you need to break the assessment down into two sections:
1.a. Your China Supplier BEFORE the Chinese New Year Holidays begins.
1.b. Your China Supplier AFTER the Chinese New Year Holidays has ended.
1.a. Your China Supplier BEFORE the Chinese New Year Holidays begins
During the run up to the holidays companies may start to experience issues with their Chinese Suppliers. These issues can include:
- A rise in customer complaints over product quality.
- Not being able to place new orders or make order adjustments with the Supplier in China.
- A change in the payment terms demanded by the Chinese Supplier.
- A noticeable rise in the cost of the product from the Chinese Supplier.
It is worth looking into the reasons why some of the above issues may occur:
- Generally workers employment contracts with factories come to an end at the start of the Chinese holidays. If the worker has decided that they want to move to a new employer then their focus on producing a high quality product may not be of high importance to them.
- Bonuses are paid at this time of year. If workers feel aggrieved over the bonus which they have received from their employers, then they will tend to channel this displeasure through the products which are being made for their employer’s customers.
- Payment terms may be changed by the China Supplier as they have to make additional payments during this time of year such as extra staff wages, staff bonuses, raw material payments and Chinese tax payments.
- For busy factories which have no spare available capacity, they might outsource the production to other third party factories where quality control standards may not be as stringent.
- Some scrupulous Chinese suppliers know that their customers have no alternative supplier. They know that these customers will have no option but to accept the increased prices which they impose.
1.b. Your China Supplier AFTER the Chinese New Year Holidays has ended.
Similar to most companies across the world, the biggest challenge your supplier in China faces when they reopen after the Chinese holidays is replacing workers who have left the company. From speaking with various factories in China it takes between 8 to 12 weeks to hire and train in new workers.
Issues which your China Supply Chain may experience include:
- Chinese Suppliers unwilling or delaying production runs of your goods until their worker issues have been resolved.
- Delays in the production timeline for your goods. Production times can increase by over 30% during this time.
- Delays in receiving updated prices for your products – Your China Suppliers may not have received all the updated prices for their raw materials. The government in China is imposing stricter environmental controls and demands on the raw materials producers which are affecting the prices of raw materials.
- Factories may not be providing suitable training to their new workers, which can cause a drop in the quality of products made. **Tip** – To avoid trade issues with China, You should use Goodada’s Inspection services here so that your product quality is maintained.
2. The Freight Company transporting your Products
Shipments out of China have steadily increased since July 2018. This is partially due to importers in the USA, protecting themselves from paying higher duties caused by the trade dispute between the US and China.
The coastal areas of China have experienced a rise in labor costs. This is affecting labor-intensive products, such as textiles, apparels, footwear, and furniture. As a result there is a move to inland China where wages are lower. This means that products made inland in China now have an additional transport cost plus these supply chain routes are not yet fully established so you may experience price volatility and delays during the run up to the Chinese New Year holidays.
11 Tips – How to Reduce Costs and Avoid Stock Outs
For Companies Selling Products into China who are looking to avoid trade issues with China
1. Confirm with your buyer the dates that your goods are required to be in China and then reduce the date by up to 10 days.
2. Get your transport company to provide regular updated prices and also have them commit to delivering the goods to match your deadlines.
3. Seek payments from the buyers in China before the holidays. Banks are often closed and sometimes buyers don’t reopen after the holidays!
4. Use the services of a Call Center company based in China such as Goodada’s China Call Center Services to provide additional customer support to your buyers in China during busy times.
For Companies Souring Products from China looking to Avoid trade issues with China
5. Create a timeline from the 1st of January 2019 until the 19th of March 2019 and call it the “China Supply Chain Disruption”. During this timeline be prepared for all types of issues to arise.
6. Build up stock reserves of key products in your warehouse. The rule of thumb is to have 12 weeks of stock to cover you commencing from the 1st of February 2019.
7. Place increased orders with your non-Chinese suppliers. Please note that countries such as Vietnam also celebrate their new year holidays during this time.**Tip- Search for new Sellers on goodada.com**
8. Make sure that all your goods are shipped five weeks prior to the commencement of the Chinese New Year holidays so as to get better shipping rates.
9. Avoid your products being stuck at a port in China. Make sure that all the goods have left your Chinese Supplier two weeks prior to the factory closing.
10. Avoid product quality issues by allocating additional funds for independent Inspection companies. **Tip – use Goodada Inspection Services.**
11. Use the inspection company to communicate with new staff that commence working in the factory after the Chinese Holidays. Often the inspector can add another voice to aid the training of these new staff.
About the Author of Avoiding Trade Issues with China
Aidan Conaty is the founder of TCI China and Goodada.com. Aidan has spent over 15 years assisting companies to trade internationally. He founded Goodada which assists companies to trade internationally.
He can be contacted email at aidan@goodada.com or be contacted at:
- (Europe/ Rest of the World) +353 1 885 3919;
- (UK) +44.020.3287.2990
- (North America) +1.518.290.6604