Despite the obstacles discussed in recent columns, the China market cannot be ignored. The changing conditions mean it is even more important to develop highly competent and knowledgeable China teams.
Increasingly, companies with Chinese aspirations are employing PRC [People’s Republic of China] staff. However, it is not clear that they always make the best use of their staff. All too often, PRC staff are a token gesture and their contribution to fast-tracking China business is ignored.
There are five levels of PRC staff deployment:
- Foreign office workers who are employed for their office skills and who just happen to have a second language. Little thought is given to what these staff can offer beyond their formal qualifications.
- Chinese-speaking staff who are deployed on a casual basis for translation tasks. These staff are mainly employed for their other office skills, and their second-language and translation ability is treated as a cost-saving bonus.
- Chinese staff who provide advice on Western business operations in China. This often involves the translation and interpretation of new Chinese rules and regulations.
The core of this work is advanced translation and reading skills. Much of their work is the facilitation of Western business practices where they intersect with Chinese regulatory requirements.
The reverse applies when this type of advice is delivered to Chinese companies in your home country and is the equivalent of a Chinese translation of Western business regulations. These are essential functions for both Western and Chinese businesses but they do not get to the core of building business relationships through genuine understanding.
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- Chinese staff who provide information and support about the culture of business in China. The main focus is on explaining to the Western company managers the problems of doing business in China. They play the role of middleman between Western concepts and the often bewildering Chinese business concepts.
All too often, this is a one-way engagement with China, aimed at working through and around problems without understanding why these problems may have occurred.
- Chinese staff who interpret and explain the practices of business in China and the way these interact with business in your home country. These staff provide a bridge between the two business cultures, explaining Western business practices to their Chinese counterparts and Chinese business practices to the Western office.
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It is certainly a mistake to assume every Chinese will have a good knowledge of business practices, but it is also a mistake to use these staff at lower translation levels when they have a wider range of skills appropriate for Chinese business.
Chinese staff provide a reservoir of everyday China skills and experience. For companies doing business in China, their Western-based Chinese staff should be much more than a convenient — even if high-level — substitute for Google Translate.
China teams do not have to be Chinese. In the past, they were often drawn from Westerners already working in the company. Some may have the ability to speak Chinese but this should not be confused with the ability to understand Chinese. The difference is critical because understanding what is meant rather than just what is said is the foundation of smooth business development.
Technical outlook of the Shanghai market
The Shanghai Index is “knock, knock, knocking on heaven’s door” with repeated tests of resistance near 3,080. This is a powerful resistance level, so it would be unusual for a breakout to occur on the first attempt. The current test follows a strong rebound from the long-term Guppy Multiple Moving Average (GMMA) group of averages. This is a bullish rebound.
Consolidation behaviour around the resistance level is the key point of interest. If the resistance level is weak, the market will quickly punch through the level. It failed to achieve this on the first attempt, and this second attempt is also weak. This suggests the resistance level is quite strong.
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In many ways, that is good news. The eventual breakout above strong resistance is often very powerful and moves quickly towards the next target level set at 3,240.
The 3,080 level has acted as a support level in the downtrend. This is the third time that the 3,080 level has been tested as a resistance feature. The first time was in November 2023.
The short-term GMMA indicator is a guide to how investors are thinking. They took profits, but have now positioned themselves to ride the next rally, because the long-term GMMA suggests that investors remain confident about a continuation of the uptrend.
The behaviour of the long-term GMMA is critical in determining if this is a sustainable uptrend. The lack of compression in the long-term GMMA during the recent retreat shows investors remain bullish and they are actively buying because they believe the retreat is a temporary blip in an otherwise strong uptrend.
The behaviour of the index around the 3,080 level is critical in understanding how the index trend breakout will develop. The balance of probability continues to favour a renewed breakout above 3,080 with an upside target near 3,240. This target is calculated by taking the width of the trading band and projecting this upwards. This trading band calculation was successful in projecting the index recovery target at 2,920 and again at 3,080.
This bullish confidence is confirmed if the index stays above the 3,080 level.
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
