China citizens may soon have better privacy law protections than the US

This has implications for a range of software services sold into China, so it is useful to understand the structure of these proposed laws and the way it may affect investment in companies operating in the country.

We usually think of China as a place where protection of privacy is pretty much non-existent.

However, the proposed new law has the potential to provide the Chinese people with tools that US and European consumers could only dream of.

The second draft of China’s privacy law — the Personal Information Protection Law — is open for public comment. The law is expected to pass by the end of this year.

It aims to protect Chinese consumers from excessive data collection and the misuse of personal data by tech companies.

More surprisingly, the law also extends protection to some extent, for misuse by government authorities.

However, the permitted use by government authorities remain much wider in scope than similar provisions in European and US law.

The new law is comparable to — and has been modelled on — the European Union’s General Data Protection Regulation. The key feature is that the law will give individuals the power to know how their personal data is being used and to consent to it being used.

Whilst the obvious targets are WeChat, Alibaba and the host of other well-known social media providers, the law also extends to any data collected in passing as a result of commercial sales (that is any customer data collected from internet sales).

Think Breadtalk located in Beijing’s New World shopping mall, or outlets in the CapitaLand-owned mall at Xizhimen near the Beijing North railway station. These outlets routinely collect customer data that is then used to bring you special offers and the like.

The new law proposals mean that even these retail outlets and websites with cookies will need to reconsider how this data is used so it meets the customer approval process.

There are increasingly growing expectations in China when it comes to privacy and the way that commercially collected data is used.

But it is a mistake to expect that a simple template of the Western privacy expectations will be applied.

Privacy in China comes from a different political environment and carries a different set of values. It may not be possible to simply transfer the privacy protocols used in Singapore to China operations.

However, the restrictions included in the proposed laws will force the larger social media players to adjust their operations and reconfigure the way they use customer data for third party commercial purposes. The same will apply to software applications under development and designed for rollout in China.

This is not an overwhelming issue for investors, but it may have a disproportionate impact on the development of some smaller software applications.

Technical outlook for the Shanghai market

The Shanghai Index has developed a consolidation pause around 3,600 and is testing support at the lower edge of the short-term group of moving averages. This consolidation is near to the projected target level for the breakout from the upsloping triangle pattern. This behaviour is similar to the consolidation around this level with the pause seen in January.

The rally is well supported as shown by the wide separation between the long and short-term groups of averages.

Support from traders as shown by the wide separation in the short term group of moving averages. The shortterm Guppy Multiple Moving Average (GMMA) indicator shows how traders are working in the market.

This separation shows good trend support but some compression has developed as some traders start to take profits. The index values are testing the lower edge of the short-term GMMA.

But the key feature to watch is the way the long-term GMMA behaves.

This tracks the behaviour of investors and if investors are confident the trend will continue, then this group of averages will remain well-separated.

This shows investors are coming into the market as buyers. The current separation is steady and wide showing strong support.

The new uptrend is defined with the uptrend line A that now has three anchor points.

The first upside target for the breakout rally was calculated by using the width of the base of the triangle and projecting this value upwards. The same technique can be applied to meet the next upside target near 3,720.

The 3,720 target level is also near to the peak of Shanghai index activity in February.

If support is strong in the current consolidation area, then the index can move quickly towards the 3,720 target. This is the most important behaviour that both traders and investors will be alert for over the next few days.

A break above the short-term downtrend from the high of 3,629 will signal a resumption of the uptrend.

A failure of support has a downside target near 3,545. This is the current value of the lower edge of the shortterm GMMA.

A fall below this level will test support created by the long-term GMMA around 3,520.

Currently, momentum indicators like the Relative Strength Index (RSI) are showing confirmation behaviour.

The trend line along the peaks of the RSI is sloping up. The trend line of the Shanghai Index is also sloping up so the indicator confirms the index trend activity.

Targets are alert for any RSI divergence signal as this is usually a precursor to an end of the current trend.

This is currently a strong breakout that has developed consolidation behaviour. The rebound from this consolidation area will create the anchor points for an uptrend line, which can be used to define the remainder of the uptrend development.

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