January 22 marks the start of the Lunar New Year, which will see hundreds of millions of people across China travel for the 23-day celebration. It’s a massive annual migration unlike any other population shift in modern global history, with hundreds of millions leaving China’s urban centers where they work and returning home to families located in more rural areas. Many factories and other parts of Chinese society close down for the duration of the holiday (which varies year to year based on the lunar cycle), causing a pause in exports leaving the country. This year, the added potential for widespread COVID infections—stranding those workers away from their jobs—is poised to cause substantial supply chain issues around the world.
There’s precedent for it. Over the past three years of pandemic conditions, the New Year’s holiday pause has been exacerbated by government-mandated shutdowns throughout large swaths of China. With an already-tangled supply chain and a booming buying spree in the U.S., especially in home furnishings products, this created enormous problems for American importers.
But for 2023’s New Year’s event, the problems are likely to take a new twist. With the dropping of COVID restrictions throughout China over the past few weeks, Chinese citizens are more free to travel than they have been since 2020. Relaxing the “zero COVID” policy has led, predictably, to a surge in infections: Already we’re seeing high rates of COVID in travelers leaving China for business and vacation. According to Forbes, Taiwan reported that on January 1 nearly 28 percent of all travelers on incoming flights from China were sick with COVID.
There’s a real human toll to all of this—but it will also impact business up and down the supply chain. If New Year’s travel leads, as predicted, to increased transmission across the country, large populations of infected workers will likely need to quarantine, delaying their return to work. Factories that would traditionally restart operations by mid-February could be sidelined for significantly longer, resulting in fewer goods being produced for export.
For American companies, there are several possible scenarios that could play out. U.S. retailers and importers, especially in home products, are still overinventoried with too many goods. But some products are selling well, and they would be caught up in the shortfall too, resulting in a scarcity of bestsellers.
Since China is still shrouded by government security measures, it will be difficult to understand how widespread the worker return issue will be. At the end of December, NPR reported, China stopped publishing daily COVID transmission data, raising concerns that “the country’s leadership may be concealing negative information about the pandemic following the easing of restrictions.” But importers will know sooner than just about anybody when they don’t get the deliveries they were expecting out of China.
It’s one more consequence in what seems to be an ever-expanding and never-ending series of unfortunate events triggered by COVID. It makes one wonder what will be next?
Homepage image: ©Teerexz/Adobe Stock
Warren Shoulberg is the former editor in chief for several leading B2B publications. He has been a guest lecturer at the Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and been cited by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. His Retail Watch columns offer deep industry insights on major markets and product categories.