Conventional wisdom has long suggested that the Chinese market is all about digital and online commerce. This was certainly true during the Covid-19 lockdowns, but times have changed. While digital channels remain important, several surveys indicate their influence on buying decisions may diminish.
No single survey from China is fully reliable because there are no truly national surveys. This is unsurprising given the country’s vast size and diverse consumer markets. Shopping habits in Yunnan differ from those in Guangzhou, Shanghai or Beijing. Preferences in Qingdao and Xi’an also vary significantly.
However, when we look at a broader selection of consumer surveys taken across the regions, we can see some common themes emerging. Given the diversity of the consumer landscape, the relevant percentage figures should be used as a best estimate guide.
Where consumers spend their money is different from how they decide where to spend it. Search engines, content creator videos and traditional media rank low in influence. Although live streaming has lost some of its appeal, it remains entertaining.
Interestingly, shopping malls and the in-store experience hold significant sway. There’s nothing like trying on shoes or seeing how a handbag looks in front of a mirror. Questions like “Does this dress make me look fat?” can’t be answered on a website. Even the best AI would struggle with such queries.
The “hands-on” social experience remains dominant in many consumer categories, but it is tied for influence with the short videos from TikTok, Kuaishou and other social media channels. For some businesses, the e-commerce channel is more efficient and suited to non-tactile products. For other products, it will provide an experience that provides an advantage.
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E-commerce platforms and shopping apps enable consumer access but are less powerful in influencing buying decisions. JDMall, Alibaba and others are more about fulfilment than influence. The consumer decides what they want to buy and then goes to these storefronts to make the purchase decision at the best price.
Product competitiveness plays a different role in this environment. Price and service delivery are important, but they matter only after the purchase decision has been made.
The brand’s official website also plays a key role in influencing purchase decisions. When buying hiking boots, I used the brand’s site as a starting point, then checked social media and review apps for further research.
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For many observing the Chinese market, the idea that a brand’s website significantly influences purchasing decisions seems outdated. Consumer surveys in China suggest that the brand website is less critical in influencing consumer decisions than social media platforms like Weibo, WeChat and Xiaohongshu, where users share reviews and recommendations that drive purchasing behaviour.
The key takeaway from these surveys is that the brand website is crucial for consumer purchasing decisions. Improving your website’s compatibility with Chinese mobile web apps can enhance its influence.
Technical outlook for the Shanghai market
China’s market is closed over the Mid-Autumn Festival, so there is little change from last week’s notes.
Will support hold? This is the critical key question for the Shanghai Index. The index has dipped below the value of the long-term support line near 2,720 but continues to hover in this area. This is a weak support level that does not have many historical touchpoints. It is also above the current value of the downtrend support line C.
If support holds in this area, traders will look for a rally rebound towards the value of downtrend line D, currently near 2,800. A successful breakout above this level has a resistance target near 2,900. A breakout above the value of trendline D would signal a new uptrend. If support near 2,720 fails to hold, the market faces a grim picture as the index slides down trendline C, using it as a support feature.
The long-term historical support is near 2,650. This support line is based on the extreme market dips in February, March 2020 and February 2016.
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The market shows little indication of a trend change. The long-term group of moving averages in the Guppy Multiple Moving Average (GMMA) indicator shows an increase in separation. Additionally, the slope degree increases as the sell-off gains more momentum. This may be heading towards an exhaustion sell-off, which is a prelude to a trend reversal. Investors are actively selling.
The short-term group of averages in the GMMA continue to move down and have accelerated the degree of expansion. The long-term GMMA is well separated with no indications of compression. There was no change in the long-term GMMA in response to the Aug 29 rally. This shows investors remain sellers in this market, selling not just into any rally but as a general approach to the market.
These are the conditions for an exhaustion dip and recovery. This is a catastrophic down day with an extreme low followed by a much higher close. This exhaustion candle signals the beginning or end of the downtrend, and traders are alert to this development.
In the meantime, the expanding degree of separation between trend lines C and D offers increasingly profitable short-term rally trading opportunities. The relentless downward pressure means that rallies are limited. However, the size of those rallies is growing.
Trend lines C and D are moving apart, so the gap between them gets larger and larger. This means that a rally from the value of trend line C has more room to move as the days go by, creating more rewarding rally trading opportunities.
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
