In contrast, in China, serious business relationships typically develop before any contract is signed or a formal agreement is reached.
Transactional business is less complex: ordering 100,000 plastic toys with hamburgers does not require a relationship that must endure.
Long-term China business is built on personal trust, and that takes time to develop. In times gone by, business conducted across the vast expanses of the ancient Silk Road rested on trust. Contracts, as we know them, could not be enforced across multiple jurisdictions, so trust was codified in other ways.
The first versions of the modern-day carnet were developed to support Silk Road commerce, as were promissory letters.
See also: Talking in circles in China
Business trust is tested and retested, although over time those tests become less frequent. In China, trust is a process, whereas in Western commerce it is treated as an endpoint.
In recent notes, we have discussed the repeated circularity of some Chinese characteristics. The winding path across a park, the repeated return in business discussions to issues that were considered discussed and resolved by the Western side.
The same turn-back circularity applies to the building of personal trust with Chinese business partners. There is no single test of trust.
See also: Humanoid robots to drive next leg of China's export dominance — Morgan Stanley
Some tests are more significant and consequential than others, but that does not diminish the importance of the smaller tests of trust. For those coming from the West, the process can feel frustrating, as issues that have already passed earlier tests of trust are raised again and presented as new tests of reliability.
These tests are both business and personal: for business, they may include delivery before a deadline; for personal, they may involve helping with the job placement of a son or daughter or facilitating an introduction.
On a smaller level, it may involve hosting a dinner or organising a tour for visitors. These are all tests of commitment and proof of trust. It is a two-way street, and the China side will understand if you engage in the same tests. Be warned. Western efforts are often clumsy and gauche and can easily offend.
The ultimate test of success is when your business partner recommends you to another contact. It is a trusted introduction that carries real weight for the introducer and signals a deep level of confidence. This is the kind of trust on which strong business relationships are built.
Technical outlook for the Shanghai market
Just a few days have elapsed since the last market notes, and these notes are prepared early in anticipation of the May Day holiday.
The 4,100 resistance level on the Shanghai Index is a powerful feature. Previously, the index spent many months oscillating around this level. The latest rally rebound has been unable to breakout above this level.
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The classic Guppy Multiple Moving Average (GMMA) breakout in the Shanghai Index continues to develop with consolidation around the 4,100 resistance.
The outlook suggests a sideways consolidation around 4,100 and a potential retreat that tests the value of the uptrend line. Current value is around 4,010.
This remains a rally and not a trend. A rally is an index rise from a single point, shown as C. The rally is running out of momentum, and the price is beginning to drift sideways.
A trend is created after a pattern of rallies and retreats that provides three anchor points. The trend line is plotted through anchor points A and B. The trend is confirmed by a pullback and test of the projected trend line. This creates a third anchor point, and then the trend is confirmed.
This has not happened, and this leaves the rally vulnerable to a significant retreat back to around 4,020 or the lower edge of the long-term GMMA. A fall to near this level followed by a rebound would create a third anchor point for the trend line.
The short-term group of averages is well separated, suggesting strong rally support from traders. The index is clustering along the upper edges of the short-term GMMA.
The short-term group of averages has completely moved above the value of the long-term GMMA. This shows exceptional optimism from traders. The long-term GMMA has quickly turned up and compressed. Proof of long term support from investors comes when the long term GMMA expands as investors become strong buyers. Expansion is developing very slowly.
An index retreat to the value of the lower edge of the short-term GMMA, or to the value of the upper edge of the long-term GMMA remain consistent with a continuation of this uptrend.
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 Chinese stock and index ETFs.
