Lunar New Year, Spring Festival, Chunjie, Seollal, Tet. The Chinese New Year has many names and is celebrated by the world’s largest ethnicity all over the globe. With its global scale, it’s no surprise that the 15-day festival brings fortune to the economy as well.
The first written record of a Chinese new year’s celebration began with a home-cleaning ritual on the last day of the year in order to expel illness. Over time, the custom evolved into the full 15-day festival it is today with many renowned traditions including the exchanging of red envelopes, and its impact on the economy is staggering.
In China alone, over one week of the 2021 festivities, Chinese people spent over US$127b in retail and restaurants despite being amidst constant lockdowns. In comparison, Americans spent a total of US$889.3b in retail during November and December that year – a weekly average of US$111b.
Revellers also bring value to economies beyond their borders during the Spring Festival: over three billion journeys are made – the world’s largest movement of people. While the number is expected to be just 2.1 billion this year due to the lingering effects of COVID-19, that’s still massive. And pre-pandemic, Chinese tourists each spent an average of US$4,462 in the U.S., US$3,754 in Europe, and US$3,541 in Australia – the highest spending tourists in the world.
In terms of the stock markets, while the Shanghai and Shenzhen exchanges close for a whole week, the China A50 index historically gets boosted in the lead-up to the holidays (much like the Santa Claus rally of the Western markets). This typically ends in a sell-off right before closure as many investors withdraw cash to prepare for holiday spending, however the previous rally usually makes its return when markets reopen.
The Chinese Yuan also wins – the USD/CNH ended lower in January for four out of five times in the last few years, a result of family and friends preparing red envelopes filled with the currency. Similarly, the demand for gold is pushed up as it’s quite common to give jewellery as gifts – however, this only has minimal effect on global gold prices.
So while the envelopes might be red, it seems many sectors can see huge green spikes thanks to the Lunar New Year celebrations.