Home Views Commentary

New Silk Road lifting people from poverty through more efficient trade

Daryl Guppy
Daryl Guppy12/18/2017 08:00 AM GMT+08  • 6 min read
New Silk Road lifting people from poverty through more efficient trade
SINGAPORE (Dec 18): Around the same time as the old Silk Road came into existence as a trade route, the Tea Horse Road in southwestern China was also thriving. This steep and narrow pathway wound its way through the jungle and over the cloud-covered hills
Font Resizer
Share to WhatsappShare to FacebookShare to LinkedInMore Share
Scroll to top
Follow us on Facebook and join our Telegram channel for the latest updates.

SINGAPORE (Dec 18): Around the same time as the old Silk Road came into existence as a trade route, the Tea Horse Road in southwestern China was also thriving. This steep and narrow pathway wound its way through the jungle and over the cloud-covered hills of Yunnan to transport tea by horse and donkey to the tables of emperors and other nobles in capitals as diverse as Xi’an, Nanjing and Beijing. It was a tendril of the Silk Road.

These tendrils still exist, as I was reminded last week, when I puffed my way up narrow mountain trails in Zhu Lin village near the Myanmar border in southwestern Yunnan to look at tea trees between 600 and 700 years old. These long-leaf Yunnan tea trees are planted not in the neat serried rows seen in the tea plantations near the Hangzhou Xi Hu mountains but oddly spaced and clinging to impossibly steep hillsides.

Leaves from the older trees command up to RMB50,000 ($10,218) per kg. The average price is RMB5,000 per kg. Buyers come to collect the leaves from specific trees to produce the renowned Yunnan pu’er tea.

But the tea no longer departs by the treacherous Tea Horse trails. It is connected to the broader New Silk Road, which enables buyers to more easily access these remote tea-growing areas. This allows special ancient trees to be individually harvested rather than having their leaves lumped together with those from younger trees.

These leaves from treasured ancient trees have massively boosted the incomes of farmers who, just a few years ago, were classed as impoverished tea growers. It is not boosted by the headline Silk Road infrastructure projects but, in the case of Zhu Lin village, by a simple, narrow, winding, concrete-paved road. It is a golden road for the village because it enables the easy transport of these leaves to markets. It allows buyers easy access, not on the back of a donkey, nor laboriously on foot, but by car, creeping along the steep and narrow concrete ribbon that puts Zhu Lin village and others like it on the map.

To the south of Zhu Lin, the gaping maw of the new railway tunnel sits on the opposite bank of the Lan Cang Jiang — Mekong river — near Daizuyuan village. In a cofferdam, the pylons for the railway bridge spanning the river are under construction, ready to carry the high-speed railway across the river and onwards to Kunming. Nearby are the giant towers that will carry the suspension road bridge across the Mekong.

This is the Belt and Road Initiative (BRI) in action as we expect to see it, but this is not the complete story of the Silk Road.

Earlier in the day, in a Dai village, I watched traditional weaving on handlooms. The beautiful silken prayer shawls are created from the weft and warp of delicate tendrils of silken thread. The New Silk Road has the same construction. Beyond the large-scale infrastructure projects are the little projects, the local projects and the small-scale projects that lift people from poverty by enabling more efficient trade through improved logistics.

The 600-year-old pu’er tea tree has seen generations of change, but perhaps no change as significant as now. No matter whether you are buying tea, transporting or drinking it, the impact of the BRI is felt across all business activity in the region.

The Shanghai Index developed a short-term rebound from the lower edge of the support trading band near 3,265. This was a temporary rally in the context of a well-established downtrend. The strong rally did not move above the upper edge of the short-term group of moving averages in the Guppy Multiple Moving Average indicator.

It is slightly bullish behaviour to see the 3,265 level act as a support level. This increases the potential for the lower edge of the trading band to act as a consolidation level prior to a resumption of the uptrend. Traders will carefully watch for the ability of this level to continue to provide strong support as it is tested again. If support is confirmed, traders will be prepared to trade the rebound rally as part of a longer-term uptrend development.

Failure of support near 3,265 confirms the lower downside targets near 3,235 and 3,200.

The short-term GMMA remains well below the long-term GMMA and is now widely separated. The upper edge of the short-term GMMA is below the lower edge of the long-term GMMA. This is very bearish.

The long-term group of GMMA moving averages have turned down and begun to compress. They have completed a crossover, and separation is expanding as the downtrend continues.

The Shanghai Index chart provides two methods to calculate the potential downside target in this trend change. The first method is the strong support-and-consolidation band between 3,265 and 3,290. This level is now being tested. A fall below the support band is bearish.

The second method uses the head-and-shoulders chart pattern. This pattern normally develops over several months. On the daily chart, there is a short-term, head-and-shoulders pattern that developed over about five weeks.

The left shoulder is formed with the rally that peaked on Oct 30. The head is formed by the next rally peak on Nov 14. The right shoulder is quickly formed with a new rally peak on Nov 22. The neckline for the pattern connects the lows on Nov 3 and 20.

The distance between the neckline and the top of the head of the pattern is measured and gives a downside target near 3,235. This is a minimum downside target because the 3,235 target is not near any established historical support level. The next support level is near 3,200.

The head-and-shoulders pattern is a bearish pattern. In this situation, the pattern suggests the market will continue to fall below 3,265 and exceed the head-and-shoulders target to reach the next historical support level near 3,200.

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 more than a decade. 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.

Loading next article...
The Edge Singapore
Download The Edge Singapore App
Google playApple store play
Keep updated
Follow our social media
Subscribe to The Edge Singapore
Get credible investing ideas from our in-depth stock analysis, interviews with key executives, corporate movements coverage and their impact on the market.
© 2022 The Edge Publishing Pte Ltd. All rights reserved.