The concept of face in China is complex, and Westerners are not expected to understand this. However, a better than basic understanding delivers significant advantages when operating in China.
This week, we examine the remaining aspects of “face”, which are transferred by association and introduction. One of the difficulties in putting together a conference in China is that people are reluctant to accept speaking invitations until they know who else is speaking. They wish to gain face by being associated with more important people, but they want to avoid losing face with less critical people.
When I speak at a conference, I transfer face to other speakers of lesser importance. I gain face when I talk alongside other international speakers. The solution is to issue speaking invitations that include information on other speakers who have been invited. People can assess if the event will give them face or transfer face. Introductions are not taken lightly and are not a simple process because they involve multiple levels of face. Introductions form an important part of business and a way to grow business. Networks are essential to trade, but the introduction networks are most successful in China.
When I introduce you to a third party, then my face is involved. If you fail to deliver, fail to perform or fail to live up to expectations, then it is my face on the line. In accepting my introduction, the third-party expects the person I have introduced will be of a certain quality. It is about trust, and this lies at the foundation of relationships. If I am introduced, I need to know that my behaviour, performance and subsequent business do not just reflect on me. All of these aspects reflect on the face of the person who has introduced me. Additionally, the performance, behaviour and quality of the person I am being introduced to reflects on the face of the person who has done the introduction. Facilitating introductions involves face for all the participants because it is an essential part of the guanxi, a term used in Chinese culture to describe an individual’s social network of mutually beneficial personal and business relationships). This system is designed to expand and develop crucial networks.
Face is tangible, and for many Westerners, this is most easily understood in terms of gifts. For example, I gave mooncakes to my friend working in Singapore for the mid-autumn festival. The more attractively boxed — and to some extent — the more reasonably expensive, the more tangible face given with the gift. This concept is not too far removed from common Western thinking about gifts. An intangible face can also be created with the same gift. Rather than buy mooncakes in Singapore, I purchased them in Beijing. This shows I made much more effort to remember and find the gift despite my busy schedule, and giving it is an intangible aspect of face.
Face is not a single unchanging concept equally applied. It is variable and situational. You have different types of face in different kinds of situations. Face changes as your environment changes. The Chinese face is more pervasive than the casualness of the Singaporeans and has fluidity and complexity beyond the formality of the Japanese. We can spend too much time worrying about the details of face, but it is inappropriate for Westerners as they are not expected to understand its details and intricacies. They are given a great deal of latitude for errors and ignorance.
See also: China tightens securities lending rule to support stock market
Still, face cannot be ignored: The better your understanding, the easier it is to do business. This and other aspects of guanxi and business are covered more fully in China for SMEs.
Technical outlook for the Shanghai market
See also: Eight reasons why I am still in favour of China stocks
The Shanghai Index breakout has stalled with consolidation between 3,220 and 3,280. A fast fall has tested support near 3,220, and this appears to have failed. The rapid fall on Aug 24 broke the developing uptrend move. The subsequent weak rebounds and stronger retreats signal a resumption of the downtrend.
The Guppy Multiple Moving Average (GMMA) relationships show an increase in downward selling pressure. The compression in the long-term GMMA shows weak selling pressure. An increase in selling pressure is shown when the long-term GMMA expands. The expansion of the short-term GMMA shows traders are not confident the market can break the downtrend.
The long-term GMMA is moving sideways but has developed rapid compression. The compression shows a high level of agreement about the index’s price and the index’s value. Such agreement periods about price and value are often followed by significant disagreement. The sudden collapse and the failure of the retest of support near 3,220 confirms the disagreement is on the downside. Traders are preparing for a retest of recent lows near 3,160.
The short-term GMMA has moved below the long-term GMMA, confirming a more robust bearish environment. The significant feature is the support level B, near 3,220. This is not a well-defined level, but this area has acted as a support and resistance feature.
A weak head and shoulder trend reversal pattern was developing, which was close to being invalidated by a move above 3,290. The failure to move above 3,290 puts this pattern into play with an extended right shoulder development.
These extended developments have become a common feature of this pattern in recent years. The head and shoulder patterns are bearish, with a downside target near 3,100. The previous weeks also saw a weak breakout, and it is now under threat. The failure of support sees a downside target near 3,040.
Daryl Guppy is an international financial technical analysis expert and special consultant to Axicorp. 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
