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CIIE affirms China’s place in the global economy

Daryl Guppy
Daryl Guppy • 5 min read
CIIE affirms China’s place in the global economy
Visitors at the 2021 China International Import Expo (CIIE) in Shanghai. Photo: Bloomberg
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Participants in the China International Import Expo (CIIE) believe the trade show — which happens this year from Nov 5 to Nov 10 — is about presenting their desirable goods and services to a public eager to consume them.

This may have been true in the years before the first CIIE in 2018, but it is no longer the case. In reality, this is China’s opportunity to remind the countries of the world just how important it is to their prosperity. Trade with China often makes up 30% to 60% of the trade economy. 

Singapore has never had any doubts about China’s contribution to the world’s prosperity and that of itself. The high level of Singapore’s participation confirms Singapore’s continued commitment to the Chinese market, creating a favourable environment for business expansion.

The CIIE provides a platform that reinforces the importance of interconnected global supply chains. This trade show is a stark reminder of economic reality in the face of post-Covid-19 demands to diversify supply chains to reduce or eliminate trade dependency on China and limit trade opportunities through unilateral sanctions and trade barriers.

The CIIE is a major trade event working directly with the Regional Comprehensive Economic Partnership (RCEP), which came into force last year. This combines the world’s most impressive import expo with the world’s largest free trade area in terms of economic aggregate and population.

The CIIE shows why any moves towards protectionism to create a global economy divided by sanctions or de-coupling is unreasonable and impractical. China is the largest trade partner for every country that exhibits at CIIE.

See also: Politics complicating China businesses, investments

It is a fair bet that China represents their largest trading partner for the more than 3,000 exhibitors at the expo. For many, China is the largest single country source of their profits.

The CIIE demonstrates why the threat to free trade posed by tariffs, sanctions and economic warfare is a threat, not just to China but to every one of the economies gathered at the CIIE that count China as their largest trading partner. 

The CIIE is also pushing on an open door, so careful attention should be paid to the opening ceremony remarks from Premier Li Qiang. They provide a guide to economic development and the priorities of economic demand.

See also: China to start 1 trillion RMB bond sale on Friday to boost economy

Li promised greater opening up of market opportunities and implemented policies to remove all restrictions on foreign investment in the country’s manufacturing sector. He flagged the introduction of negative lists for cross-border service trade. This means if the service is not on the negative or banned list, then the service can be provided. 

This is an important step towards “supporting innovation in foreign trade formats and models.” It opens the door for innovative exports in this area because authorisation can be assumed unless it is specifically banned. This reduces the risk involved in bringing new services to the Chinese market.

Li promised to “boost digital trade” and to establish a pilot zone for Silk Road e-commerce cooperation in Shanghai. This extends the digital economy’s Belt and Road Initiatives (BRI). Singapore is well-positioned to develop blockchain-based digital services compatible with BRI standards.  

Technical outlook for the Shanghai market

The current rebound on the Shanghai Index still retains the characteristics of a rebound rally rather than a trend change. Four strong resistance features block the development of a sustained uptrend. This week, the first of these has been breached, but the other three remain unchallenged.

The feature is the value of the lower edge of the long-term group of moving averages. This is currently near 3,050, and the index has moved above this level. The long-term Guppy Multiple Moving Average (GMMA) shows how investors think about the market. The wide separation in this group of averages suggests they continue as aggressive sellers. There is no indication of compression, which would suggest the beginnings of a change in how investors assess the market. 

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The second of these resistance barriers is the value of the historical resistance level near 3,080. The market will likely test this level several times before a successful breakout develops. We can anticipate consolidation around this level.   

The third resistance feature is the value of the upper edge of the long-term GMMA. A trend change is not signalled until the index can close above and stay above this upper edge of the long-term GMMA.

Sustained closes above this level, accompanied by rapid compression in the long-term group, show that investors have stopped selling and become buyers.

The final resistance feature is the value of the longer-term downtrend line. The horizontal resistance and trend lines intersect around the end of November.

This is a critical point in market development. A breakout near this period can be very powerful. Traders, in particular, will watch for rally developments in this period. 

This is a bullish situation than in previous weeks, although the potential for a rapid breakout remains low. Investors and traders will watch the character of any market retreat for clues to a diminished level of downside pressure.  

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

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