The largest and fastest-growing market in the world is the Brics group, which has expanded to include Indonesia for a total of 10 member economies. The legacy economies in the US and Europe are stuttering along, some with near-zero economic growth.
The legacy economies remain an important part of any export and growth plan, but they are no longer the most profitable markets. Tariffs and sanctions make them less attractive.
The Brics are leapfrog economies. China is a good historical example of leapfrog economic development. The low level of physical telephone lines and services made for a much faster uptake of the new mobile services. This allowed China to skip or leapfrog a generation of telephony development and move quickly to exploit the opportunities offered by cell phones.
In the aspiring Brics countries, this is seen with their immediate access to 5G and 6G technology. It means that economies can work with fast train infrastructure technology rather than gradual upgrades of rail infrastructure over several iterations.
The result is rapidly expanding economies with high growth rates. This growth creates a rapidly expanding middle class with modern consumer aspirations. They do not want black-and-white televisions. Their demand is for the latest wide-screen digital TVs. It is the leapfrog effect.
So the question becomes: Who is best situated to meet these expanding consumer and development needs? In past decades, these countries would typically look to the US and Europe for these higher-end consumer items. Material from Asia, particularly Korea and Japan, has become significant challengers to European goods. In simple terms, the Landrover was replaced by the Toyota Landcruiser, and Peugeots by Kias and Hyundai.
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In the middle of the third decade of the 21st century, China is meeting these expanding consumer needs in Brics. Electric vehicles are a relevant example of this structural change in demand.
In 2024, China produced 10 million high-quality electric vehicles (EVs), offering multiple different models. The quality — not the quantity — terrifies established car manufacturers in the US and Europe. The result is excessive sanctions and tariffs, which are designed to protect local industries from competition.
The demand for vehicles is growing most rapidly in Brics countries and this underpins a strategic pivot. The outlines of this transformation of the Chinese economy have been given in recent speeches and at the Central Economic Work Conference. As Western markets potentially close doors with a possible 60% tariff, China is positioning itself for an aggressive expansion into emerging markets.
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They will supply not just EVs but the digital and hard infrastructure required to support and serve EVs. These emerging consumer economies are not dumping grounds for outdated models. They are new, expanding markets hungry for advanced products.
This economic diversion is broader than just EVs, and only China has identified the opportunity. The US and Europe are too busy erecting tariff barriers.
Business leaders who believe the Chinese economy is failing are missing the significance of this economic reorientation.
For global businesses, China’s preparation for a strategic economic realignment means new competition in emerging markets, shifting supply chain dynamics and fresh opportunities in China’s domestic market transformation.
Technical outlook of the Shanghai market
The Shanghai Index crashed through the trend line support near 3,335. The tentative uptrend failed to establish a confirming rebound point, which was tentatively identified as point D. This collapse below the trend is a technical feature of the index behaviour.
Additionally, the index dropped to below the lower edge of the long-term group of averages in the Guppy Multiple Moving Average indicator (GMMA), which captures the market’s behaviour. This fall was accompanied by a rapid compression in the long-term GMMA. This shows that investors have joined the selling and confirms that this is not a temporary overshoot in an established uptrend. It signals a change in the trend.
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The most optimistic outcome is for the market to pause and consolidate near the historical support and resistance level near 3,160. This is not an exact level, but this area has acted as a resistance or support point several times in 2024. A rebound from near this level encounters strong resistance features.
The first resistance feature is the projected value of the failed uptrend line, which is currently around 3,350. The second resistance feature is the historical level near 3,440. In both cases, these levels are considerable distances from the current index activity. Reaching these levels would require a significant change in market sentiment.
Failure of support near 3,160 has a downside target near 2,980. Although this level was easily broken in September 2024, the level has been a significant support feature for several years. A fall to this level is a serious adjustment to the behaviour of the Shanghai Index.
In the longer run, this suggests that the index will return to trading between support near 2,980 and resistance near 3,160.
Although these levels provide an easy-to-measure point for potential trend changes, the GMMA relationships help confirm the sustainability of any trend reaction. The key measure is the long-term group of averages because they provide an indication of how investors are thinking.
At points B and C on the chart, the long-term GMMA confirmed that the retreats were temporary and offered good entry points for trend continuation. The wide separation showed that investors remained as buyers.
The compression that followed the dip below the trend line confirmed that investors had quickly become sellers and this accelerated the trend change.
The key feature to watch is the behaviour of the index around the support level near 3,160.
Daryl Guppy is an international financial technical analysis expert. For two decades, he has provided weekly Shanghai Index analysis for mainland Chinese media. Guppy appears regularly on CNBC Asia and is known as “The Chart Man.” He is a former national board member of the Australia-China Business Council
