China officially became the world’s No 2 economy surpassing Japan. China has been relying on low wage cost to serve as the factory of the world to boost its exports. However the advantage of a low wage structure is diminishing and China itself is facing competition from other low wage countries.
The next chapter of expansion will depend on whether domestic consumption is able to propel the economy to greater heights. With the population in China, China’s domestic market is something that global companies cannot afford to ignore.
The Shanghai stock index is in a wide trading range between 2580 and 2680. The phase chart has been in “Recovery” phase since 22 July 2010 with the index above its 50 day moving average. The 200 day moving average is at 2900 levels and the market doesn’t look to have enough momentum to test this level just yet.
The chart pattern is still positive at this stage with the index rebounding from the low formed on 13 Aug. An inverted head and shoulder pattern has been established in the charts and this gives a target of 2740.
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