The rise may not be as strong as that in the US over the same period. It is a little less than the rise in the Straits Times Index, but at 15%, it hardly constitutes an economic knockout blow that drives economic growth to the floor.
What this result does show is that the world for Chinese exports is much larger than just the US. It also highlights the Chinese export market’s ability to switch to alternative markets quickly.
This is impacting Asean markets, where Chinese exports are up 17% y-o-y. The export reorientation increases competition for existing non-Chinese exporters in those markets, making it more difficult for them to develop new business.
Domestic demand can also be satisfied through increased domestic production. This is the objective of developing the dual circulation policy. Imports must compete against domestic production. The increase in China’s brand and reliability, as well as its features, makes China a more competitive market for imports.
See also: Wall Street banks lift China growth outlook after bright quarter
China has also increased its activity in markets of the Global South, again making these a more competitive marketplace for other players. China’s no-tariff policy for countries in the Global South is a brilliant move. The long-established Belt and Road Initiative has become an entry point for this trade expansion.
China can maintain economic resiliency because global trade uncertainty will impact all economies. China has the ability to quickly adapt and pivot with product development and design. This agility enables China to maintain its resilience in foreign trade.
The Chinese market offers a beacon of trade certainty in a global environment marked by tariffs and trade uncertainty unleashed by the US. This cannot be ignored, so there is an increasing push to develop systems and arrangements that reduce dependency on US markets. These are also designed to mitigate the impact of capriciously imposed tariffs.
See also: China’s GDP seen outpacing target, easing stimulus pressure
China is also leading the way in developing coordinated responses to create a trading environment free from the pressure points of the US dollar, the Swift trade settlement system and the unilateral tariffs imposed outside the World Trade Organization framework.
This makes China a more desirable and stable market for those doing business with and in China. Businesses will face increased competition from China as Chinese companies shift their focus away from the US. Businesses will also see more opportunities in China as growth resumes. China’s growth will not be a surprise.
Technical outlook of the Shanghai market
The Shanghai Index rally has developed a minor pullback in a well-established, steady uptrend. The index value was clustered along the upper edges of the short-term group of averages in the Guppy Multiple Moving Average (GMMA) indicator, but is now testing the lower edge of this group. The short-term group of averages indicates the way traders are thinking about the market. The steady separation suggests they have a high level of confidence and are likely to step in as buyers at any point of weakness.
After this extended trend behaviour, some profit-taking is expected. This is reflected in the new test of the lower edge of the short-term GMMA.
The lower edge of the short-term group of moving averages remains substantially above the critical resistance level near 3,435. The value of the lower edge of the short-term GMMA is the first support feature for the index. The second feature is the value of the old resistance level, now a support level, near 3,435. This is also neat to the value of the upper edge of the long-term group of moving averages in the GMMA. This provides a stronger support barrier to protect against any large fall in the index.
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As anticipated, the upper edge of the long-term GMMA has moved above 3,435 by July 15. This is part of strengthening support near this level. The second confirmation of support and trend strength is when the lower edge of the long-term GMMA moves above the 3,435 level. Based on the current trajectory, this could occur around July 25. The strength of the uptrend is significantly confirmed when the long-term GMMA moves completely above 3,435.
Trend line B acts as an additional support level for the developing trend. In an extreme pullback, this would be the final support feature for a continuation of the uptrend.
There are three target areas for any sustained trend continuation. The first target is the value of the trend line A. The projected trend line acts as a resistance feature. The current value of the line is near 3,615.
The second target is near the previous high of 3,675 reached in October 2024. The Shanghai Index behaviour is defined by well-established trading bands. A trading band projection target is slightly higher than the October 2024 high and is placed at 3,700.
Daryl Guppy is an international financial technical analysis expert. He has provided weekly Shanghai Index analysis for mainland Chinese media for two decades. 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
