Some readers suggested that last week’s gentle discussion of corruption lacked detail. Corruption takes many different forms. Some are overt and easily recognised. Other forms are less obvious and quickly fade into the same grey areas occupied by the billion-dollar lobbyist industry in the US.

Here are examples of some business practices. Read through them and decide if you think they fall into the category of corruption:

<ul> <li role="presentation">Extra payment for ‘special’ service,</li> <li role="presentation">Asked to pay for ‘special’ service, but service was not delivered,</li> <li role="presentation">Pay for a product or service, but a different product or service delivered,</li> <li role="presentation">Asked to pay extra for superior product placement,</li> <li role="presentation">Different pricing for the same product or service depending on perceived status,</li> <li role="presentation">The same law is swiftly applied in some instances but very slowly or not in other instances of the same offence.</li></ul>

On the surface, many readers will point to these as examples of corruption. Dig more deeply, and the conclusion is not so clear. Let us go through them again.

Extra payment for ‘special’ service: We do this daily when we use the American Express concierge service to get priority seats and event bookings. Tip the restaurant concierge for the special table and the attentive service. These are all so every day that it doesn’t feel corrupt, yet here is a payment that goes into an individual’s pocket for a service delivered as part of his employment.

Asked to pay for ‘special’ service but service not delivered: Payment for extra legroom seats on airlines represents a customer preference, not an airline obligation to provide the special service. Refunds are not available when the service is not delivered.

See also: <a class='gtm_see_also_1_inread' style='text-decoration: underline;' href='/views/china-focus/china-must-avoid-debt-deflation-spiral?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>China must avoid a debt-deflation spiral</a>

Pay for a product or service, but a different product or service delivered: A levy or tax is imposed for a specific purpose, but the bulk of funds raised disappears into general revenue.

Asked to pay extra for superior product placement: Companies willingly pay for page premiums in advertising. Companies routinely pay for shelf placement in supermarkets and chain stores.

Different pricing for the same product and service depending on perceived status: One of the most dangerous questions you can ask on an aeroplane is how much the person beside you paid for their seat. There are various pricing options depending on who you are and how you booked, but you all end up on the same flight and sitting in economy class.

See also: <a class='gtm_see_also_2_inread' style='text-decoration: underline;' href='/news/china-focus/china-economy-shows-more-signs-stability-policy-boost?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>China economy shows more signs of stability on policy boost</a>

The same law is swiftly applied in some instances but not in other instances of the same offence. Numerous studies in the US and the UK have shown how race affects the application of the law and the apprehension of suspects.

When these examples are placed in a Chinese context, we assume they are corrupt. Put them into our home context, and they become normal business practices. Corruption exists in China, but do not confuse every business practice with corruption.  Make sure you know the difference.

Technical outlook for the Shanghai market

Reality killed enthusiasm as the Shanghai Index opened at 3,220 on Aug 28 and plunged to test support near 3,080. The high open is not evidence that the downtrend has ended. This is highly unusual market index behaviour, probably best ignored for analysis purposes.

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The large candle moves within the constraints of the structural analysis of the index chart. It is contained within the resistance level near 3,220 and the support level near 3,080. The giant move is, however, an aberration that does not impact the general direction of the trend.

Historically, there has been index activity between resistance near 3,220 and support near 3,080. This was a feature of the market rise in 2022 and the most recent market fall. This main trading band dominated the market activity before moving above 3,220 in January.

For more stories about where money flows, <a class='gtm_see_also_3_inread' style='text-decoration: underline;' href='/section/capital?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>click here for Capital Section</a>

The large move on Monday confirms the importance of these support and resistance levels. The retreat to nearly 3,080 confirms this as a consolidation area. In any strong downtrend, there is the potential to dip below this level as part of the consolidation activity. This is seen in December 2022, and there is the potential for a repeat of this behaviour.

The primary signal for the development of an uptrend is for the index to move above and stay above the value of the downtrend line, currently around 3,170. The reaction of the index around this trend line is the most important guide to the end of the downtrend and the development of a new uptrend. The trading band resistance levels will constrain any breakout.

The trading bands define the structure of the market, but they do not describe the behaviour of the market. The Guppy Multiple Moving Average indicator helps to identify this behaviour. The key question for investors remains. They must decide if the market can find and hold support near 3,080.

A fall below 3,080 is unreservedly bearish. A very weak support level is near 3,040, but the next significant support feature is near 2,980. That is more of a consolidation area than a support level.

Despite the aberration of the high opening on Aug 28, this continues to be a horror market for those who can only trade from the long side. They are trapped in losing trades, shaping the nature and strength of any recovery. In this environment, price activity will cluster around the historical support and resistance features as existing stockholders sell.

This means sharp rallies on the back of thin volumes in market activity will likely be overwhelmed with selling around the resistance areas. This will result in extended consolidation periods where the index loses steam and momentum because buyers are overwhelmed by desperation selling.

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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