Huawei Technologies’ Mate 60 phone was sold out within days of its quiet launch. This achievement has several implications for future business activity in China.
Technologically, the Mate 60 is built around the Kirin 9000s chip. The processor is the first to use Chinese chipmaker SMIC’s 7-nanometre manufacturing technology. The phone also uses the latest Huawei-designed Harmony operating system and AI algorithms.
These technologies sit at the centre of a galaxy of Chinese start-ups that rely on Huawei’s platform to build their applications for face and voice recognition, pattern identification and other purposes. Increasingly, these will become the foundation of China’s digital exports to Asia and elsewhere.
The idea that any product from the West is inherently superior and hence more desirable than its Chinese competitor, was destroyed by the Mate 60 launch.
Politically, this was important because the timing of the launch was a direct but polite reminder to US Secretary of Commerce Gina Raimondo that sanctions have failed to impede China’s technological advances. It was a reminder that the US should approach China as an equal competitor. This was also a confirmation of the development of a framework for the sophisticated Chinese digital economy.
The US cannot assume technological and digital dominance despite President Joe Biden’s Chips Act and other sanctions. That conclusion has significant implications for business and product development.
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For businesses, the launch of Mate60 was important because it showed that technological sanctions do not work. China remains a significant player in the digital economy.
Physical solutions to sanction-induced chip shortages have kept the path open for technological development. Software developers, service providers and platform developers cannot ignore Chinese advances in these areas. If they want to compete in China, they must acknowledge and incorporate China’s advances and technology standards.
Development in areas including 3D printing, green energy generation and energy storage, solar energy, minerals processing, quantum computing and 6G are all now subject to real competition.
See also: Trump's tariffs hurt more than just China
The key challenge will come if the US continues to try to isolate China in these fields because businesses will then need to make a choice about which standards to adopt for product development.
This is a problem already acknowledged by Asean members. This lack of support for universal standards runs contrary to the objective of the Digital Economy Framework Agreement (DEFA) announced after the recent Asean economic ministers meeting of the Asean Economic Community Council in Jakarta.
This agreement is essential in setting universal standards for the digital economy built on the world’s best practices rather than on political demands.
China remains too big to ignore as a player in setting digital standards. Business engagement with China will increasingly rest on compatibility with China’s advanced digital standards, software and products.
Technical outlook of the Shanghai market
The Shanghai Index has resumed normal volatility behaviour after the extreme market plunge. The downtrend line continues to act as the primary resistance feature with the market reacting away from this value. The Guppy Multiple Moving Average (GMMA) shows some evidence of a stronger rally. However, the spread in the long-term group of averages suggests that investors are not yet convinced there is a change in the trade.
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In any case, a breakout above the value of the downtrend line encounters significant resistance from the long-term support and resistance level near 3,220.
The test of trendline resistance was also a breakout above the resistance level near 3,160.
A notable feature on this chart is the intersection of the downtrend line with the resistance level near 3,160. This intersection will develop around the end of September. It is a critical point where these two resistance features meet because it signals the end of the prevailing influences on the market. It is not that resistance will disappear. It is more that it signals a point where the market must readjust the values and significance of these two features.
It is a point where the market may decisively continue with the existing downtrend or break out from the existing downtrend. It is a point of changing of the guard so traders will be ready for volatility as the day of this intersection point approaches.
Such changes do not take place at the exact point of intersection so the market may move decisively in the days before the date of this intersection crossover. In this sense, the current rally is particularly interesting. A sustained breakout above the trend line may develop into a significant trend change.
The primary signal for the development of an uptrend is for the index to move and stay above the value of the downtrend line, currently around 3,170. The reaction of the index around this trend line is the most important guide to the end of the downtrend and the development of a new uptrend. Any breakout will be constrained by the trading band resistance levels.
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
