Unfortunately, it is becoming more difficult to do business and remain neutral in the US-China environment.
It is an issue that is in front of mind for diplomats and leaders trying to juggle the competing demands of these two superpowers as they jostle for position in our region.
The idea that business can avoid involvement and engagement is turning out to be a luxury businesses cannot afford.
That is not to say that businesses needs to line up with or against any of these groups. The problems tend to manifest themselves at a more personal level, and it is the comments and discussions that take place on an informal basis. It is the invitation to agree with a position put forward by a business counterpart.
Disagreement is not always dangerous or fatal, but it can corrode the relationships which are so important for many doing business with China.
Take for example the two Chinese athletes wearing Mao pins as they stood on the medal dais at the Tokyo Olympics. Do they deserve the condemnation from Olympic officials?
Really, I do not care and it is not a discussion I am interested in. But when my Chinese colleagues raise the issue, then fudging an answer is not a big issue.
On perhaps a more significant scale is the ongoing score around the source of Covid-19.
More salt was poured into this festering wound this week with a Danish TV interview featuring one of the leaders of the World Health Organization (WHO) investigation team that visited China.
Dr Peter Ben Embarek said it was a ‘‘likely hypothesis’’ that a laboratory employee could have picked up the virus while working in the field.
He is not saying the coronavirus leaked from the lab. What he is saying is saying that it is likely it was picked up from wild bat samples in the field.
In the rush to conflate “likely hypothesis” and “lab employee” with the “lab leak” theory, many commenters ignored the context.
Dr Embarek observes, quite uncontroversially, that there is a risk of infection while studying wild bat populations and collecting bat samples. It is hazardous work and researchers involved in the research in the wild wear appropriate personal protective equipment (PPE).
This is where it gets rockier than the discussion about wearing Mao badges. It is trickier because elements of the Western media did an excellent job of misrepresenting what Dr Embarek had to say.
The result was a revitalisation of the idea that Covid-19 leaked from the Wuhan Institute of Virology’s BSL-4 lab.
Never mind that this is not what Dr Embarek said. This is the story running wild in Western media, and it is this headline that is widely reported in China.
The truth and careful analysis is lost in the resulting news and social media reactions.
This is where as business people and investors we just want to stand aside and avoid the discussion. We do not want to get involved, but increasingly this choice is taken away from us.
Chinese colleagues are upset by the reported coverage in Western media and they have strong views on the issue. They are happy to raise the issue, to challenge the conclusions and to invite you to agree with them.
A refusal to comment, or to take a side, may offend. This is much more important than your views on wearing Mao badges.
Some of these issues, like the promotion of the lab leak theory, are politically sensitive and they are a topic of common discussion. It is very likely to come up in casual conversation and your response to it will help build — or undermine — long-standing business relationships.
I have no 30 second mastery course for handling difficult questions in China. However, as people doing business in China, we need to be aware that these are becoming increasingly important questions and that they will be asked.
When this happens, it is not a good time for an ill-considered offthe-cuff answer.
Technical outlook for the Shanghai market
The resistance features on the Shanghai Index have proved to be very powerful with the market rapidly retreating from the value of up trend line A near 3,540. The retreat then tested the central support level near 3,450 before developing a new rebound.
This behaviour is likely to dominate the index over the next few weeks. The strength of the support level near 3,450 is a well-established feature of the Shanghai Index behaviour.
It is the central level around which the index has oscillated for many months. It is also the central level of the very broad trading band.
The new feature is the influence of the uptrend line A. This is proving to also be a strong resistance feature. The index clustered near the value of this line for several days but was unable to break out above it.
This trend line intersects with the upper resistance level near 3,580 in early September.
This suggests that any rebound rally activity in the Shanghai Index will continue to be capped by uptrend line A for several more weeks. Any breakout above the trend line A will encounter resistance at the upper edge of the trading band near 3,580.
As we move into early September, the combined resistance features of the trend line and the trading band resistance level will act as a very strong resistance feature making it difficult for the index to develop a bullish uptrend.
This suggests that the market will continue its rally and retreat behaviour for a few more weeks. It suggests the Shanghai index is unlikely to develop new sustainable uptrend behaviour.
The dominant feature of the Index chart is the long-term support and resistance level near 3,450. The market has oscillated around this level on a consistent basis.
The upper level of the trading band is the resistance level near 3,580. The lower limits of the trading band are near 3,330.
The general upwards trend starting in March was defined by trend line A and this led to the market breaking into the upper half of the oscillation band in late May. The outlook remains bullish whilst the index continues to move in the upper half of the trading band.
The current behaviour is a rally and does not have the characteristics of a sustainable uptrend. A sustainable uptrend is defined with multiple tests of the trend line as a support feature. A rally moves quickly without any sustained retreat and rebound activity that confirms a trend line.
Traders watch for further rally, retreat and rebound activity to develop because this will enable the placement of a reliable trend line.
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
Photo: Bloomberg
