The commercial significance of Chinese New Year

Ken Deayton, Founder, Director and CEO of the Hong Kong Corporate Services Group, has been living, working and advising international businesses in Hong Kong for over 40 years, and knows a thing or two about how China works.

With the Lunar New Year fast approaching, we spoke with Ken about the cultural and commercial significance of the holiday and what international businesses should expect, and prepare for, during this time.

Understanding Lunar New Year

The Lunar New Year (or Chinese New Year) is one of China’s most significant annual celebrations.

Centuries old, the festival was traditionally about honouring the Gods and ancestors, which makes it an important time to be with family, friends and loved ones.

While Lunar New Year is a Chinese celebration it’s important to note that it is also celebrated in other Asian countries and territories, including: Taiwan, Hong Kong, Macau, Singapore, Indonesia, Malaysia, Korea, Thailand, Vietnam, Cambodia, and Mauritius.

Australian businesses owned by Chinese investors or Chinese corporates conducting business in Australia may also observe the Lunar New Year, or close down to travel back to China to visit family or pay respect to their elders.

The annual festival is celebrated at the turn of the traditional Chinese calendar – the lunisolar – and traditionally runs for an entire month.

“The impact of Lunar New Year on international trade and business in China is still significant, but it’s much less pronounced than it has been in the past,” Ken said.

“Government offices shut down from the Lunar New Year’s eve for an entire week, while commercial enterprises close for up to 10-12 days and factories for up to a month.”

The first day of the Lunar New Year falls on the new moon, with an animal from the Chinese zodiac representing the coming year. The 2017 Lunar New Year was the year of the Rooster, while the 2018 Lunar New Year, which will fall on Friday 16 February, will be the year of the Dog.

So, if you’re doing business with China this year, it’s worth taking the time to read about the significance of the Dog zodiac and how it may impact interactions and decision making over the coming year.

How businesses can prepare for Lunar New Year

Ken says that when it comes to understanding the significance of the Lunar New Year and how it might impact business and trade, it’s best to compare it to the Christmas and summer break in Australia.

“Traditionally everyone will go home to see their families for the Lunar New Year, so it’s similar to Christmas in Australia, where it’s assumed that business will just stop for a period of time,” Ken said.

“It’s a good comparison, because even though some people might be back at work, it’s not an easy time to be doing business with China, the focus is on family, celebration and tradition – business comes second.

“It’s possible to get things done but it’s difficult, so be prepared, and expect that there will be delays – in some cases you may not even get a response from Chinese partners during this time.”

The significance of cultural understanding

Understanding the importance of Lunar New Year and other significant festivals and cultural celebrations is just the beginning when it comes to doing business in China.

Ken says that having a better understanding of similarities and differences will assist anyone looking to start trading or doing business in China.

“There are some major differences in the way the western world conduct business to the way we do it in China – with just one example being contracts,” he said.

“In Australia, New Zealand and Canada a contract is a binding document, but in China it represents the beginning of the real negotiations; it’s not a definitive document of terms, and many international businesses can be tripped up by this.

“With the arrival of the China-Australia Free Trade Agreement I have seen a number of Australian businesses fall into this trap, and it’s a major issue which can only really be avoided and solved by professional advisors who are aware of these cultural differences and how to get around them.”

Seeking professional advice

There are a number of ways international businesses can approach doing business in China, but Ken’s number one piece of advice is to avoid going it alone.

“There are a number of good corporate services and advisory firms in Australia, New Zealand, Singapore, and on the ground here in Hong Kong, that are set up to help international businesses making the transition into China,” Ken said.

“Advisors can help with the protection of assets, including intellectual property, negotiations and advice about how businesses should approach China – it’s a very different way of doing business, so ensuring you get the right advice is essential to your success.”

Hong Kong Corporate Services Group has been working with Bentleys on producing roadshows throughout Australia to provide strategic advice for Australian businesses on how to approach doing business in China. To find out more sign up to the Bentleys Aspire program to receive further information on upcoming events.