How difficult can it be to do business with China? It is not a question about the current trade war between the US and China, although it does complicate matters. It is a more basic question about how you access this market. If you cannot successfully open the door then all the opportunities behind the door are hidden from you.
Five key issues form a composite key which will help unlock the China door. The first component is respect to seniority and education. It is not a feature that sits easily with many Westerners who are accustomed to a brash merit-based business culture where age is not counted as a merit. When respect for seniors is mentioned they often confuse this with obedience. Respect is taking the time to listen and giving full consideration to these opinions.
The person who speaks English in the meeting is not always the most important person. It is important to recognise there is a very detailed hierarchical structure which is partly based on seniority and partly on class. We might also put this into the concept of face which is more subtle than the cartoon representations common in Western literature.
The second and third components are related. It is the speed of decision making and a respect for the processes involved in making a decision. China business decisions are both frustratingly slow and frustratingly fast. The simple seems to take forever, and the complex — at times — can be resolved quickly. Understanding these processes is difficult and it is not helped by insistent demands for a speedy resolution. Patience is not a strong Western virtue.
The third component is to accept and respect the China processes and work with them. You can act like Google and demand that processes changes to suit your requirements but like Goggle, the result is not successful. It is going to take time, but US President Donald Trump is going to recognise this lesson. Doing business in China is different, just as doing business in the US is different, but for many businesses it seems difficult to accept the legitimacy of Chinese business processes.
And this is the fourth component of the key: For far too many Westerners, it is a challenge to leave behind the smug feeling of Western superiority. This is manifest in many ways, both subtle and overt. It is a difficult idea to shake because many businesses go to China armed with the belief that their idea, or service or product, is inherently superior. You need confidence but this confidence also needs to be tempered with reality.
This is also increasingly reflected at a political level with Western leaders demanding China change its political structure and suggesting the Chinese people should demand their Government become more like the dysfunctional liberal America.
The final fifth component of the key for many is the most difficult to accept. In most cases we are far less important to the Chinese than they are to us and our business plans. It is a humble realisation for many and a significant stumbling block. China may be our largest trading partner, but we are only one of many of China’s trading partners. China is the largest trade partner for 124 countries while the US is largest for 56 nations.
Understanding these five components will not necessarily build a successful key for every venture but it will make China business engagement easier and more successful. In the current environment these components are critical not just for success, but for the continued maintenance of your China business. Doing business in China is difficult but without this five-component key it becomes even more difficult.
This is not just a business key — it is also a political key that unfortunately lies unused in several Western nations.
Technical outlook for the Shanghai market
The Shanghai Index is testing a potential double top pattern. The index rise lost momentum, as it reached the previous highs near 3,457 and has made a small retracement. Consolidation near this level is not a big concern as it may take several attempts to develop a successful breakout past this new resistance feature.
A new uptrend line could be added to the chart. It would connect the lows of July 24, July 29 and open price on Aug 14. However, this line is very near to the value of the upper edge of the long-term group of averages in the Guppy Multiple Moving Average (GMMA) indicator. This is the 30-day EMA line and this line provides a better indication of support for the new uptrend rally.
This suggests current support is near 3,305. This means the index could fall back to the level and still remain consistent with the longer term uptrend. A sustained fall below the 30-day EMMA is a warning of a potential reversal of the uptrend.
Traders are watching for a minor retreat followed by a stronger rebound rally continuing with a breakout above the resistance level near 3,475.
The first upside target for the rebound rally is near 3,460 and this is the current consolidation region. The breakout target is near 3,560. This is equal to the peak index highs in February 2018. This is not a strong historical resistance level so there is good potential to quickly move higher.
A trading band projection is applied with caution and it suggests an upside target near 3,900. This is a long-term target so the path to this level will not be smooth. The uptrend will consist of rallies and retreats as they develop a more gentle and less volatile trend up move.
Currently the long term GMMA is well separated and this is very bullish. The long term GMMA is a guide to the way investors are thinking. Good separation in this group suggests investors remain confident. When the index falls, they come into the market as buyers.
The compression and expansion activity in the short term GMMA shows consistent trading activity. This is normal behaviour in a developing uptrend. The warning signs of trend weakness are when the short term GMMA penetrates the long term GMMA.
