For decades, China has utilised Confucius Institutes — cultural promotion programmes funded by the Chinese International Education Foundation — to engage with the West to promote various aspects of Chinese culture and provide Chinese language instruction.
These are quite limited objectives, and although they have increased cultural awareness, it remains an open question about how much they have advanced Western understanding of China.
Western media perpetuates outdated myths about China, hindering business development and contributing to broader political tensions. Meanwhile, the Chinese narrative is undergoing a significant shift. Previously, the focus was on comprehending Chinese culture for business, promoting localisation and adapting practices.
Understanding and navigating cultural differences was an important foundation of business success in China. Books like my own, China For SMEs, discussed the differences and offered adaptive solutions.
Sun Yeli, the Communist Party of China central committee member, launched the World Conference on China Studies in Shanghai in late November. It provided more policy details around some of President Xi Jinping’s comments at the business function in San Francisco.
The key policy point was that the West needed to understand that China has been a continuous civilisation for 5,000 years. This represented a deliberate shift in the narrative China wanted to present to the West. It is a shift designed to alter the way the West understands China and will impact how Western businesses interact with China.
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The emerging narrative of a ‘clash of civilisations’ in the US and China dispute extends beyond trade, influencing American actions in the South China Sea, sanctions on chip exports and broader efforts to contain China and impede its technological progress. These factors continue to impact business, investment and operations in China.
Civilisation is more than just culture — it is also about how China perceives the world, distinct from the Western perspective. Misunderstanding is the key challenge in cultural interactions. While American values are well-known globally, there is limited awareness of the foundational harmony values that define Chinese civilisation.
The commonly attributed values to Confucius oversimplify Chinese civilisation, overlooking the complex influences of Taoism, Buddhism, legalism and other political philosophies. Summarising China’s 5,000-year civil society is more intricate than encapsulating the American dream of 250 years.
See also: Eight reasons why I am still in favour of China stocks
The outcome is that some individuals in the West may find it challenging to embrace China’s global perspectives, which prioritise harmony over hegemony. These differing viewpoints contribute to a potential preparation for conflict based on hegemonic concerns rather than fostering cooperative and harmonious relationships. Businesses, especially those operating in China, grapple with navigating these distinct approaches. In the past, these tensions were addressed with a deeper cultural comprehension. While still crucial, the shift in policy emphasis highlighted by the Shanghai conference introduces fresh challenges for those seeking more nuanced engagement with China.
Technical outlook for the Shanghai market
The strong reaction away from the dual resistance features on the Shanghai Index has continued. The resistance features were the long-term downtrend and the historical resistance level. This has developed into a very bearish reaction with downside targets near 2,920.
The peak of the most recent rally at 3,089 provided an additional anchor point to confirm the placement of the downtrend line. The reaction retreat from this downtrend line confirmed the strength of the downtrend.
The relationship in the Guppy Multiple Moving Averages (GMMA) confirms the strength of the bears. The long-term averages have turned down again and have expanded. This tells us that investors have resumed their strong and steady selling.
Three strong resistance features blocked the development of a sustained uptrend and defined the downtrend.
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The first feature is the value of the lower edge of the long-term group of moving averages. The Index has moved well below the lower edge of the long-term GMMA. Although we can expect a rebound rally, this will not be enough to change the direction of the trend.
The second of these resistance barriers is the value of the historical resistance level near 3,080. The level was tested twice, and on both occasions, the index retreated from this resistance feature. This will remain a sufficient resistance feature, capping any rally rebound and inhibiting the development of any new uptrend.
The final resistance feature is the long-term downtrend line. In the near term, this will be the first resistance feature to overcome before a new uptrend can develop.
Any new rally will now have to overcome the resistance created by the new value of the downtrend, near 3,050 and then later, the value of the historical resistance level near 3,080.
The first downside target for this continued downtrend is near the previous lows of 2,920. Investors will watch for the market to consolidate or rebound from this area. There is the potential to develop a double bottom pattern, or “W“ pattern, which would signal the start of a trend rebound.
The “W” pattern has two targets. The first is the peak of the “W” near 3,080. The second longer-term target is near 3,240. This is double the height of the “W”. It is too early to know if a “W” pattern will develop, but traders remain alert for this possibility.
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. The writer owns China stock and index ETFs
