Practical financial considerations for your business ahead of Chinese New Year

When is CNY?

The Chinese New Year will begin on Tuesday, 1st February 2022, although local business communities will have started their preparations weeks beforehand.

Apart from Singapore, a country with a large Chinese population, Chinese New Year is also a major holiday celebrated in mainland China, Taiwan, and Hong Kong. In other Asian countries such as Vietnam and South Korea, they celebrate their own lunar new year holidays respectively. 

Singapore’s diversified culture means dealing with both local and international representatives. Sending the right greetings are important and convey respect. If your clients or business associates are from the following countries, do be mindful that their firms or individuals themselves will be affected as well. Getting in touch early with them is advisable.

Understand the fluctuations in the stock market

The Singapore Exchange (SGX) observes Chinese New Year for the first two days. As per tradition, distributing money as a form of gift-giving is believed to bring luck to both the giver and the receiver. For this reason, long waiting times are expected at ATMs and banks, as fresh banknotes are preferred for red packets. 

With the stock market closed and large funds cashed out of financial institutions, fluctuations in stocks are not uncommon. One to two weeks prior to market closure, stock markets typically experience a dip in terms of volume – but they quickly recover after reopening. As CNY approaches, expect a decline in foreign trade and investment in Asia as well.

Understand how to manage your inventory

For those in the supply chain industry, do consider Vendor-Managed Inventory (VMI), a type of business model that allows both parties to maintain an agreed-upon level of inventory for a product. When it comes to long lead times and huge holidays like CNY, VMI can be useful to ensure that the inventory is maintained. The vendor will adjust for market shift and seasonal demand and order accordingly, thereby reducing the cost for the buyer. To forecast your demand and plan an order schedule, your vendor will require your sales history and latest inventory.

Understand the effects on cash flow

Besides the stock market, most banks observe CNY and are closed for the first two days. No payment will be processed during this time. To avoid causing a negative impact, make sure that your company’s payment process and cash flow payment are scheduled in advance. Furthermore, in Chinese culture, it is also taboo to not repay your debt before the New Year. If you have Chinese partners, it is best to ensure all due invoices are paid ahead of time.

In conclusion, being prepared for Chinese New Year will have far-reaching impacts on your business. Doing business in Singapore during CNY may not be convenient but managing the problems and opportunities that come with it can set your company apart from the rest.

Planning for CNY is only the beginning. There are also several other holidays in the Chinese calendar that may affect your business: