Tech puts new spin on Chinese New Year tradition

Screen grab of WeChat's holiday add-on that allows users to send electronic red packets to family and friends.

With Chinese New Year just a week away, 26-year-old Huang Jing has started exchanging "red packets" with her close friends, even though she's single.

Married couples traditionally give red packets – cash gifts in red envelopes called "hongbao" in Mandarin – to their parents, unmarried adults and children during the Lunar New Year as tokens of good luck. The tradition of gift giving is set to continue, but Chinese are putting a new spin on it with the latest fad: exchanging electronic red packets via smartphone.

Unveiled by Tencent last month as a holiday add-on for its wildly popular messaging service WeChat, the service allows users to send and receive digital envelopes of money though the company's payment service. It also has an option for unpredictability, enabling users to contribute a sum of money that the app will decide how to distribute among their friends.

According to Chinese media reports, the service saw 18 million (approximately $2.9 million) worth of transfers in its first 24 hours.

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Elements of success

Apart from facilitating gifts of "lucky money" across long distances, China's e-commerce boom and a gaming element underpinned the success of Tencent's new spin on a deeply-rooted Chinese tradition. The growing acceptance of online transactions also fueled enthusiasm for the add-on. Nearly 60 percent of mainlanders prefer red packets to be directly deposited into their bank accounts, according to a recent survey by Avanti Research Partner.

"The sum can be as low as 1 yuan so I don't feel the pinch. Plus, it's quite addictive like a game. My friends and I take turns to put money in the group chat and let lady luck decide who gets the most of it," Huang, who lives in the southern Chinese city of Guangzhou, told CNBC.

As competition heats up in China's internet space, the new service is a "shrewd move" by Tencent to get its four-year-old messaging app ready for monetization, experts say. While rival Alibaba also provides a similar service called "Hongbao", WeChat's dominance in the instant messaging realm helped it to gain the upper hand. The frontrunner in China's messaging space had nearly 468 million active users in the third quarter of 2014, according to Tencent's data.

"This is a shrewd move by Tencent to expand its mobile payment network. It is not a major money maker, but this is the way to grab more users," James Roy, associate principal at China Market Research Group (CMR), said. "By getting people to link up their bank accounts, it paves the way for spending on its e-commerce site and taxi apps."

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Shopping made easy

Apart from electronic "red packets", some mainlanders are also relying on the country's burgeoning e-commerce sector to beat the crowd during the festive shopping period.

"Previously, I would rush to buy clothes and goodies after work or on weekends. It was tiring," 33-year-old Shanghai resident Liao Qingshi said. "This year, I spent two lunch breaks placing orders online and arranging for home delivery. It's so convenient that I ordered groceries for my parents in Hangzhou."

Physical retailers are not losing out though, with many venturing into online platforms and offering delivery services to make the most of the annual holiday season, experts noted.

"The popularity of e-commerce is alarming many brick-and-mortar retailers so they are jumping into the space as well, hoping to keep up with competition" said CMR's Roy.