In 2003, Secretary of State Colin Powell held up a vial and used it as evidence that Iraq had weapons of mass destruction. His claim was quickly taken up by the media and became a truth upon which policy and war, was founded.
It was a lie, and acting on that lie had disastrous long-lasting consequences.
In July 2020, Secretary of State Mike Pompeo kick-started a campaign about Xinjiang, basing his allegations on just one source — claims made in German researcher Adrian Zenz’s study of birth rates in Xinjiang. His claim was quickly taken up by the media and has become a truth on which policy is founded — most recently underpinning US sanctions against Xinjiang supply chains.
Zenz, who has not visited Xinjiang, is an evangelical fundamentalist Christian who graduated from the hyper-Christian Columbia International University in South Carolina.
A key basis of Zenz’s research was an allegation of population suppression. In fact, the census figures show Uyghur population growth is much higher than the national growth rate. Uygur population, life expectancy and average income continue to rise in Xinjiang. There is no refugee crisis in the region, something which would seem almost certain to follow from the level of ethnic violence and political repression alleged by western media.
What if these claims are, like the weapons of mass destruction claim, a lie? This impacts how businesses should respond. Perhaps, it is a mishmash of lies and facts and getting to the bottom of the commentary is made more difficult by Covid-induced travel restrictions.
See also: China resumes multiple-entry visas for Shenzhen to Hong Kong
However, there is evidence to suggest that some of these claims are part of a wider anti-China campaign and this puts businesses in a difficult position.
In his 2021 book, journalist Michael Smith writes about a state-organised visit to Xinjiang in which he claims everything he saw was fabricated. Yet towards the end of the chapter, he details his “escape” from his official hosts and the hours he spent wandering the alleyways and soaking up the street life in Urumqi.
“It was the only real thing I saw on that trip and, ironically, the scenes that night matched the governments narrative that the people of Xinjiang were not living in a state of fear,” he writes. This observation is consistent with my experience in Urumqi, Kucha and other Xinjiang locations. However, Smith’s observation is not enough to have him revise his earlier claims of fabrication.
See also: Trump's tariffs hurt more than just China
When I visited Xinjiang, my Chinese host wanted to take me to lunch in a Muslim restaurant during Ramadan. In Urumqi, the capital of Xinjiang, we could not find a Muslim restaurant that was open in the old quarter.
Meanwhile, a report in The Australian newspaper claimed all Muslim restaurants in Urumqi had been forced to remain open during Ramadan. It was claimed to be an example of Uyghur repression but it did not match my on-the-ground experience.
Most recent is the report issued by the tribunal chaired by Sir Geoffrey Nice. The tribunal was funded and supported by propaganda arms of the US and has no legal or political authority. However, it concluded that the evidence for the destruction of the Uyghurs in Xinjiang was insufficient in all but one of its terms of reference, and even then the evidence was doubtful. This is not the impression created by Western media reporting.
The imposition of US sanctions means that many more businesses and supply chains are now forced to take a position on Xinjiang so it is important to understand what is really happening.
Technical outlook for the Shanghai market
The Shanghai index is clustering around the value of the support and resistance level near 3,590. The fall below the value of trend line C and the value of the support level B is a signal of trend weakness but not yet a signal for a new downtrend.
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The placement of trend line C was not fully confirmed as a new uptrend feature. However, the importance of support level B near 3,590 is a long-term support feature so the fall below this level is significant. This retreat suggests that the uptrend that developed, and that was defined by trend line C, has come to an end. The index is using line B as a new resistance level.
This is a bearish situation. It is confirmed by the relationships in the Guppy Multiple Moving Average indicator. The long-term group of moving averages provides insight into the way investors are thinking. This group of averages is compressing and turning down. This shows that investors have joined the selling. They no longer believe the uptrend can continue.
The short-term group of averages indicate the way traders are thinking. This group has rapidly compressed and turned down. They did not find support in the longer term GMMA. Traders are becoming sellers and will not come to the rescue of the uptrend.
These GMMA features, and the break below trend line C and the break below the support level B all confirm the high potential for a trend change. The Shanghai index has a weak support level near 3,540. This is the next target for the downside movement in the trend. This level acted as a resistance feature in August 2021. It acted as a support feature in September 2021 and again as a weak resistance feature in November 2021. However, this support and resistance feature had no influence on the market in the first half of 2021. This confirms that this level is a weak feature in the current market.
If the 3,540 level fails to act as a good support level and a base for a future rebound rally then the next downside target level is near 3,450. This is a long term support level best seen on a weekly chart. During the second half of 2020 this level acted as a strong resistance level. During a market retreat, this can now act as a support feature.
Currently, the 3,590 will also act as a resistance level for any future rebound in the Shanghai Index. There is a low probability that the index can develop a strong rally and stay above the 3,590 level. This behaviour signals a return to trading within the long term trading band that has defined index behaviour for much of 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 national board member of the Australia China Business Council. The writer owns China stock and index ETFs
Cover image: Bloomberg
