Beijing is quiet. No, it’s not because the economy is slowing down.
The clue comes from the rash of seemingly moss-tinged numberplates on cars. They are almost as ubiquitous as the usual blue Beijing number plates. They seem to be everywhere, although they make up around a third of numberplates.
The moss-coloured green in the upper left corner denotes an electric vehicle. Forget the high-end Teslas, although there are plenty of them. These are byd and other mid-range brand cars. There are enough of them on the road to reach the critical mass which is able to suppress the once-dominant background noise of vehicles.
It is a signal of change in consumer habits that is also reflected with the online shopping giant JD.com. On a visit to its Beijing headquarters, vice president Li explained the shift in shoppers. As he talked, it was early on a quiet Sunday morning. The activity counter clicked rapidly above nine million.
Covid has seen a change in the age profile of users. Now almost half of users are 26 to 35 years old. Then there is another substantial group in the 36 to 45 age bracket. They are looking for a different combination of goods and services. JD.com is innovating to meet these changing consumer preferences.
Sales slowed in the traditional retail customer market but economic growth was accelerating in new areas. China has always been about change, and it is the companies that can innovate and pivot with that change that survive and grow.
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The web provides a broader and easier reach, so there is more concentration on how to service tier 3 and tier 4 cities in China. This is where JD.com sees the next wave of growth. It is also a clue for others who are looking to expand or enter the China market.
When I left JD.com city, we drove past multiple clusters of cranes, 10 or more to a construction project. The skyline was not dominated by them in the same way as it was pre-Covid, but nor was it a skeletal graveyard of a dying economy.
Wenzhou and Hangzhou provided a similar sight, with cranes dominating the skyline as new buildings continued to rise. Later, I spoke at the Wenzhou Entrepreneurs Forum. The forum was a hotbed of innovation and growth, with many searching for capital partners. Worries about restrictions on the supply of high-end computer chips are low on the list of concerns.
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Hangzhou, Cloud City, the home of Alibaba, is focused on the 2050 target of what the internet, the web and 6G services will look like. Their eyes are on the future, not on consolidating the past, or struggling to survive the present.
There is an acknowledgement that things have changed, but with this comes a revitalised focus on developing the current and developing opportunities. There is optimism about the future.
The idea that the China economy is teetering on the edge of collapse is very much an American pipe dream. In fact, the withdrawal of American and to some extent European business, is exposing opportunities for others to step in and fill the gaps.
Technical outlook for the Shanghai market
The Shanghai Index is increasingly looking like it is developing a trend change. The rally has been steady. It is encountering significant resistance features. These are the long-term downtrend line and the historical horizontal resistance level. It is unreasonable to expect a fast breakout above these two features. However, the steady increase in upward pressure suggests there is now a good probability of a successful breakout developing.
The relationship in the Guppy Multiple Moving Averages (GMMA) is also changing. The long-term group is moving sideways and starting to show signs of compression. This tells us that investors have stopped their steady selling. It is too soon to say that investors have become buyers. This will be confirmed with future compression in the long-term GMMA which shows investors are reaching agreement about price and value.
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There are four strong resistance features which block the development of a sustained uptrend.
The first feature is the value of the lower edge of the long-term group of moving averages. The index is clustering along the upper edge of this group.
The second of these resistance barriers is the value of the historical resistance level near 3,080 which is currently being tested. It is most probable that the market will test this level several times before a successful breakout develops.
The third resistance feature is the upper edge of the long-term GMMA. This is also now at value as the resistance level at 3,080. A trend change is signalled when the index is able to close above and stay above this upper edge of the long-term GMMA.
The final resistance feature is the long-term downtrend line. The horizontal resistance line and the trend line intersect around the end of November.
All of these resistance features are clustered closely together. A breakout above these combined features will be very strong with an initial upside target near 3,180.
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
