Moving beyond this subsistence, mechanising is a more challenging task as technological and communication advances change the structure of the economy.
This was brought to mind during a conversation with an Australian export agent deeply involved in South Australia’s wine industry. They were celebrating the reopening of Chinese markets after a prolonged shutdown.
Business was strong, but success was coming from unexpected quarters. Wine sales were up, but this came from the sale of premium wine and premium prices. Previously, the bulk of sales had come from mid-range wines.
Now, their mid-range competitors are emerging from Ningxia and other regions in northwest China, where the terroir and climate more closely resemble those of leading wine-producing areas in Italy and France. While grapes have long been cultivated there, the game-changer is the infusion of European and Australian winemaking expertise.
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The result is a far superior product, capable of challenging the region’s past reputation for poor-quality wines, once so lacking in appeal they were often mixed with sweeteners like Coke.
What happened? The importation of French, European and Australian wines successfully changed the palate of Chinese wine drinkers. But that was not enough to turn them away from these wines and towards the new wines coming out of Ningxia.
More than marketing was required to swing Chinese palates towards Chinese wines. One of the more significant factors was proof of origin and the sanctity of the supply chain. This goes way beyond the bottle and the label, which is what foreign wine producers continue to rely on.
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The most competitive wines from Ningxia carry with them a blockchain-based seal of authenticity. Blockchain guarantees that what is in the bottle is genuine. It ensures that the product has not been adulterated, substituted or contaminated. These are all vital factors in a country where food security — is it safe to eat or drink? — is an important issue.
These blockchain guarantees enable the pricing to reflect a premium product because of the guarantees that blockchain is able to give. It is this technological advance that has helped Ningxia wines to overcome the poor reputation of Chinese wines quickly, so they have rapidly become fierce competitors to the foreign branded premium wines.
This reputation seeps downwards to the mid-range wines, making these also more acceptable and more competitive in the space once dominated by Australian wines.
On the surface, the market may appear unchanged, but its underlying drivers have shifted dramatically. The competitive advantages of the ‘last war’ no longer yield the same results. Those who cling to outdated strategies become casualties in the battle for evolving consumer preferences.
Technical outlook for the Shanghai market
The Shanghai Index broke rapidly above resistance near 3,300. It also closed above the upper edge of the long-term group of averages in the Guppy Multiple Moving Average (GMMA) indicator. It is too early to confirm a trend continuation, but this breakout carries all the signs of a developing uptrend.
The narrow spread in the long term GMMA was evidence of weak resistance at this level. The index paused, but it was not overwhelmed by selling. If this were the case, then it would be shown by an increasingly wide separation in the long-term group of moving averages.
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Instead, the narrow degree of separation showed the market was biding its time. The narrow separation makes it easier to push into a new uptrend as there are fewer sellers clustered at this level.
It is the relationships within the groups of averages that provide information about traders and investors and their intentions. Although the GMMA is constructed with moving averages, it is not a variation of a moving average crossover. The relationships reveal the way the market is thinking.
The current value of this uptrend line is very near the historical resistance level of 3,435. A break above both of these resistance features has the potential to be very powerful and makes the next target near 3,674 more achievable.
However, a breakout above 3,435 has a new resistance level near 3,450. This is the updated value of the uptrend line that defined the previous
up trend, and which from January to March acted as a support feature.
Now, the projected trend line acts as a resistance feature. A close above the value of the uptrend line means the line will act as a support feature. This breakout would also confirm the continuation of the uptrend with longer-term targets near 3,670.
Applying the trading band projection method, the next technical upside target is near 3,710. This is also an important historical resistance level. It acted as resistance in 2014 and 2015. It was a strong resistance level three times in 2021.
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
