With a quarter of all Australian trade, and a significant amount of New Zealand trade, taking place with China, the month-long celebration of Chinese New Year can have a considerable effect on SMEs.
Chinese New Year is the event that has one of the biggest impacts on international trade each year.
This year, Chinese New Year and the “Year of the Rat” begins on 25 January and the official holiday lasts a week (24-30 January). However, with Chinese businesses preparing and some undertaking extended celebrations, the business impact can last up to a month.
Local businesses in China close in each of the major cities – everything from offices, banks and factories will shut down. Many millions of Chinese workers travel from the cities back to their rural home towns to celebrate with their families.
Other countries with large Chinese populations including Malaysia, Singapore, Indonesia, Thailand and the Philippines are also impacted.
It can be a challenging time for importers and exporters, but with preparation you can minimise disruptions.
One of the most effective ways to ensure you have enough working capital is to use trade finance.
Trade finance is where a lender serves as a third-party to make the trade process go smoother and reduce friction during transactions.
For instance, a lender might offer extended credit to the importer to fulfil an order and provide an advanced payment to the exporter that matches the agreement terms..
Not only does trade finance help reduce the payment risk and supply risk and improve cashflow, it makes things easier across the board for both parties during the busy Chinese New Year period.
With some thought given to preparation, SME importers can stock up on items for the first quarter of 2020 and have all of the inventory they need, even if the ordering schedule is disrupted because of Chinese New Year.
As for exporters, they’ll be able to ramp up production without having to worry about major payment delays.
Craig Michie, import finance spokesperson, Scottish Pacific