The business terrain in China has changed so it is even more important to have a well-informed “China champion” at the executive level who can understand and adapt the way the business engages with China.
As China’s economy contracted, many China teams in companies were disbanded. For those left behind, despite their best efforts, the momentum has gone out of the company’s China strategy. China has become just one part of the company’s domestic and international strategy. A change in the structure of the management board often sees the removal of the China champion which leads to business irrelevancy.
China champions build the China business and they are needed as companies re-engage with China. This is what they do. The China champion believes passionately in the potential of the China market. He does not need to be particularly skilled in terms of understanding Chinese business culture but he is convinced the company has to be in China and that it has to develop a long-term business in China. Armed with an idea and a conviction, he sets out to assemble a team of skilled managers and staff who could deliver on his vision. This was the China strategy that was driven from the top.
The team he will put together and the team he empowers will have the skills, knowledge and experience to fill in the gaps and the details within the framework of the broader China strategy. In board meetings, the China champ fights for his team, not just because they are good but because he believes in the importance of what they are doing.
He fights for the idea of China as a significant business opportunity. This is not a popular idea in the current environment.
When the China champion is forced to leave the company, he does not take any particular China-specific skills or knowledge with him. The China team he has developed remains behind. But when he left, dedication, commitment and belief in the China strategy also left the board room. Regrettably, the likelihood of failure for the company’s China strategy might increase because promoting business in China is hard work and even more so as the current China business environment evolves. The nuances and demands of operating in China are very different than elsewhere.
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When China teams are disbanded, the best of these team members will find work with companies that have China champions at the management level. They will help carve out new business opportunities with China for their employers because they understand the subtlety of doing business in China.
Doing business in China well is already hard work. Doing business in China with consistent success on a long-term basis is even harder work. It requires a commitment to the idea rather than just working long hours and under high pressure. More than ever, now is the time for top levels of company management and the board to share this commitment to its China business and support China champions. A well-defined reservoir of skilled team members is available.
Technical outlook of the Shanghai market
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The Relative Strength Index (RSI) divergence signal on the Shanghai index does not provide a method for estimated upside targets for the trend reversal and breakout. The indicator identifies a high probability that the downtrend will reverse. It is the standard support, resistance levels and trend lines that help establish targets for the breakout.
The two dominant features on the Shanghai Index chart are the old resistance level near 2,920, which has become a support level. The index can retreat to this level and remain in an uptrend breakout environment.
If the index does retreat to this support level then the main focus will be on the way the index rebounds or consolidates around this level. A rebound is very bullish. A consolidation where the index moves sideways and uses this level as a support feature is still bullish. However, this consolidation suggests that the new uptrend will rise more slowly and show more stability.
The most bullish outcome is for the index to remain above the down-sloping trend line and use this as a support level. This confirms a continuation of the fast rally rebound. It is exciting for traders but it also carries a higher level of trend instability.
The Index may slide down the value of the downtrend line, using it as a support feature. This is also bullish. The down-sloping trend line intersects the horizontal support level around the last week in March.
This is a very significant period because it is when two support features merge. Failure to move above these support features is very bearish.
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The potential strength of the rebound rally and trend development is shown in the Guppy Multiple Moving Average (GMMA) relationships. The short-term group has compressed and rapidly turned upwards. This is the normal behaviour in a rally. More importantly, the long-term group of moving averages has also quickly compressed and turned upwards. This shows that investors have joined in the buying and are providing good support for the emerging uptrend.
Trend continuation is confirmed when the lower edge of the long-term GMMA moves above the value of the horizontal support level near 2,920.
The upside target for the breakout is resistance near 3,080. The index can move quickly to this level but 3,080 is where consolidation is expected because this level has been a long-term support feature. This suggests it can become a long-term resistance feature as the index rises.
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 ETFs of China-listed stocks
