None of these questions were addressed directly, but the thrust of the discussions made sure that these issues were addressed, even if obliquely.
Again, not stated, but lurking behind the discussion was the spectre of Donald Trump, tariffs and the commercial punishment meted out apparently on whim. Was there the commitment and courage to withstand this bullying behaviour?
What should have been a straightforward commercial discussion was disfigured by this external environment. It’s not just a problem with new investment proposals. It’s also a problem with existing business arrangements, but, perversely, it can be applied beneficially.
Those who have worked in China know the value of friendship and the way this is used to ameliorate the frequent obstacles that come with business in a foreign country.
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If friendship is a rock, then friendship in adversity is a gemstone.
Rice-bowl friends are those who are friends in the good times, but who abandon you when things get tough. There is a special kind of disfavour reserved for those companies which run away when things become difficult and then, many years later, slink back, hoping the people have forgiven their cowardice.
Tariffs and the general pressure from the US to abandon cooperation with China are testing the bonds of friendship. Companies doing business with China fall into two camps. The first camp is those for whom China is their primary customer. Their choices are limited because withdrawal from China destroys their business operations. Despite this, their counterparties will be looking for evidence of commitment to the Chinese market.
See also: China’s retaliation to EU curbs complicates ties before summit
The bonds of friendship need to be reaffirmed so they can be seen as a trusted partner.
The second camp is those companies for whom some of their business is with China. Elimination of their China connections would be inconvenient, but not fatal. Many of the companies listed on the stock exchange have significant China exposure in their supply chains or service components.
The Chinese side is nervous about these companies, and they will seek reassurance that the bonds of friendship remain in place. Companies that take the initiative to reach out to their Chinese partners and suppliers will reap the benefits. It may take commercial courage to do so, but Trump has ensured that this is no longer business as usual.
Scottish in origin, the Robert Burns poem Auld Lang Syne, traditionally sung at New Year, is strangely appropriate. “Should old acquaintances be forgot, and never brought to mind?” The answer you give underpins the future of your China relationship.
Technical outlook for the Shanghai market
The Shanghai Index rally has developed into a steady uptrend. The index value is clustered along the upper edges of the short-term group of averages in the Guppy Multiple Moving Average (GMMA) indicator.
The lower edge of the short-term group of moving averages has moved above the critical resistance level near 3,435. This is significant because this is the first time this has occurred since the initial index jump in September 2024.
The development means the index now has two support features. The first is the value of the lower edge of the short-term GMMA. The second is the value of the old resistance level, now a support level, near 3,435.
Traders watch for two additional confirming features for a strong trend continuation. The first is when the upper edge of the long-term GMMA moves above 3.435. On the current trajectory, this could be as early as July 15.
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The second is when the lower edge of the long-term GMMA moves above the 3,435 level. Using the current trajectory, this could be around July 25. The strength of the uptrend is significantly confirmed when the long-term GMMA moves completely above the important historical resistance level near 3,435.
The lower edge of the long-term GMMA is above the value of the upsloping trend line B. The trend line acts as an additional support level.
It’s too early in trend development to become too comfortable. The index could retreat to 3,382 and remain above the uptrend line. However, any retreat is more likely to be halted by the support shown by the long-term GMMA. The wider the separation in this group of averages while they are moving upwards, the greater the support for the trend.
There are three target areas for any sustained trend continuation. The first target is the value of the trend line A. This was previously a support feature; now the projected trend line acts as a resistance feature. The current value of the line is near 3,600.
The second target is near the previous high of 3,675 reached in October 2024. This was a rally peak that had no relationship with any historical resistance points. The peak represents a psychological, rather than a chart-based technical barrier.
Well-established trading bands define the Shanghai Index behaviour. The width of the bands is measured and projected upwards to provide the next target level. 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. The writer owns China stock and index ETFs
