This was not a victory for competition. It was pure commercial thuggery designed to benefit US phone manufactures. It provides an interesting counterpoint to the different approach to development, community obligation and the pursuit of profit.
Born in Taiwan, but nestled deep in US culture, Jensen Huang from Nvidia sits at the opposite side of the table to Huawei’s founder Ren Zhengfei. The comparison reflects some fundamental differences in approach.
Huang comes eighth in the list of the world’s richest people. He is up there with Musk, Zuckerberg and Gates. They command companies where their lowest-paid workers, many of whom are in China, may need to work for several lifetimes to make as much as the company owners take home in a single day.
Ren isn’t even among China’s top 20 richest people, even though Huawei’s revenue is more than 100 times larger than companies like Cambricon, whose founder is on that list.
See also: The coming China shocks
In the 1990s, Ren introduced a unique ownership structure at Huawei. The company belongs to its employees. Out of Huawei’s 208,000 employees, more than 150,000 are shareholders; 99.35% of shares are owned by the employees, with Ren holding the balance.
It is an arrangement that makes the Americans deeply suspicious of Ren. It makes Huawei immune from stock market fluctuations. More significantly, Huawei is driven by a system where the employees directly benefit from success
The result is remarkable innovation, motivation, deep loyalty, and a true sense of ownership across the entire company. It is a Chinese socialist version of capitalism that does not rest on the exploitation of its workforce.
See also: Vanke’s loan request rejected by at least two Chinese banks — Bloomberg
This is not just a quaint anecdote based on two outliers. It reflects a different understanding of one’s obligation to society and the role of financial success. Some of the world’s richest are also Western philanthropists, but not to the extent that they risk their position on the world’s richest list. Ren reflects the Confucian idea that success carries with it an obligation to society. This reflects the idea that a gentleman is a modest man.
Modesty, humility and social obligation are concepts that carry weight in China. They are concepts which Western business and leaders can do well to emulate if they wish to tap into the streams of innovation and loyalty that underpin Chinese innovation. American sanctions have delayed my phone upgrade, but they have not persuaded me to swap out my Huawei phone.
Technical outlook for the Shanghai market
The index retreat below the support level near 3,888 is bearish. For the first time in many months, it signals an end of the trend because it has closed below so many critical support features.
However, the end of the trend does not mean a sudden switch to a downtrend. There is still life in the market. This sharp fall, followed by a tentative rebound, shows the momentum has faded for the uptrend. It may still continue to move up, but it will be weaker, less sustainable, and more open to significant trend changes.
So here is what we can expect.
A successful rally rebound will move above resistance near 3,888. It will also move above the value of the long-term uptrend line, currently near 3,934. The key feature to watch in the rebound is the ability to move quickly above the previous highs and consolidation zone near 4,000.
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The ultimate upside target is the trading band projection target near 4,100.
Although these are bullish outcomes they take place within the environment of a weakened uptrend. This trend weakness will be confirmed with the Guppy Multiple Moving Average (GMMA). The long-term group of averages will narrow, showing weaker support from investors.
The separation between the short-term and long-term groups will become more erratic with more frequent tests of support from the long-term GMMA.
The downside picture is clearer. There is no decent support until around 3,700. A reaction away from 3,888 has 3,700 as the downside target. This is the base of the lower edge of the previous trading band.
The index has not yet started a downtrend, but the uptrend momentum has weakened.
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. The writer owns China stock and index ETFs
