Tingyi, better known as Master Kong and the clear industry leader in China’s instant noodles, is a useful example. Noodle volume has stayed soft, but shoppers have been trading into better packs, and Tingyi’s noodle-segment margins have kept climbing.

That felt counterintuitive to me. In China’s deflationary environment, I would expect premiumization to be hard unless your customers are wealthy households mostly insulated from the macro. It’s hard to see an obvious path for the selling price of instant noodles, a daily staple, to rise, yet industry leaders managed to increase their gross margins (something even many ‘new productive forces’ companies failed to do in this hyper-competitive market).

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The other detail that stuck with me is more cultural than financial. Instant noodles with a grilled sausage is a classic late-night or affordable one-person meal combo almost every Chinese person recognizes. It is just a mundane comfort food meant purely to satisfy hunger—not some viral trend cooked up on social media.

Put those two observations together, and a quiet but interesting consumer pattern starts to show: despite a nationwide preference for freshly made food over factory-processed alternatives, cheap, tasty, and transparently labeled industrial brands are actually becoming a go-to choice in China.

I’ve been thinking of this pattern as something I call Honest Industrial Meals: factory-made food people still choose, as long as the price is fair and the brand is clear about what they are buying.

Food delivery was a necessity born from overtime work

For many young, working Chinese, home cooking stopped being the default years ago. Long overtime, tiny kitchens, and delivery apps made ordering dinner feel more rational than chopping vegetables after 9 pm. That’s how Meituan and Eleme turned takeout into infrastructure.

Delivery solved efficiency. But it did not permanently solve trust.

Over time, delivery-only kitchens have spread across the country. These ghost kitchens have no dine-in space and are often squeezed into residential corridors or office buildings, targeting busy urban workers who want cheap, fast meals. Naturally, they rely on factory-made, pre-processed food that can be microwaved and ready to go in under a minute.

Whole floors of office buildings have been rented out as delivery-only food halls: no dine-in, just racks for couriers, and hygiene that is often worrying. In a market where customers increasingly want food fast and cheap, restaurants have had little choice but to cut costs. Skipping a street-front shop for a cheaper office-building kitchen saves rent, and many office workers never planned to eat in the restaurant anyway.

Even big casual-dining brands have joined in. Tai Er Sour Fish, the flagship brand under Jiumaojiu (09922.HK), is one example: it opened dozens of small delivery-only “satellite stores,” roughly 40–60 square meters with no dine-in seats, and partnered with Meituan to roll out about 50 of them in 2024. Consumers still see the bright mall storefront on the app; the bowl often comes from a corridor kitchen upstairs.

By late 2025, ghost kitchens had become a massive, underground industry. State media began reporting on borrowed licenses, opaque sourcing, and storefront photos that did not match the actual stalls behind the app icons. Much takeout food has since become notoriously associated with heavily processed industrial meals packed with chemical preservatives.

While delivery platforms like Meituan and Eleme still expand aggressively, many consumers are pausing to question what this efficiency actually brings them, and what they are putting on their tables.

“Prepared dishes” gradually picked up a stigma.

When prepared food showed up at restaurant prices

That stigma sits on top of a Chinese food idea that does not translate cleanly: guoqi (锅气). In everyday Chinese, guoqi is the smoky, just-off-the-flame taste that tells you a dish was stir-fried for you in a hot wok. It became shorthand for authenticity. Factory food became shorthand for something cold and corporate.

But restaurant chains complicate that folklore. Many use central kitchens for consistency, cost, and food safety. Consumers still use “prepared dishes” loosely for anything that feels factory-finished rather than wok-finished.

That gap between kitchen reality and customer expectation exploded in September 2025 around a brand almost every Chinese family knows.

Xibei is a household northwest-style casual dining chain: oats, hand-pulled noodles, lamb, family tables, the kind of place people take parents or kids for a reliable sit-down meal. Its founder, Jia Guolong, built that national familiarity over decades and is a familiar, outspoken face in Chinese restaurant media. When a brand that sold itself on home-style cooking looks industrial, the backlash is sharper than it would be for an anonymous delivery stall.

On September 10, entrepreneur and influencer Luo Yonghao posted that a Xibei meal was “almost all prepared dishes, and so expensive.” Xibei pushed back, citing the national definition of prepared dishes, claiming its food wasn’t entirely pre-made, and opening its kitchens to the public. However, this move backfired, revealing to millions of netizens that the food was indeed cooked in central kitchens and sealed in vacuum packaging. As traffic took a hit, Xibei apologized by September 15 and pledged to bring several dishes back to in-store cooking.

The anger was about opacity, restaurant-level prices for industrial dishes, and the feeling of paying for a guoqi promise while receiving a heat-and-serve plate.

But the juxtaposition of the two problems somehow created an interesting overlap. On one hand, ghost kitchens are pushing young consumers toward chains and big brands for food safety and transparent nutrition labels. The worse the food-safety problem spreads in the takeout industry, the more demand there is for a transparent, honest industrial meal.

On the other hand, they simply do not want to pay a guoqi premium for industrial food. If they know they are just paying for a quick, convenient workday meal, it is better to buy from a trustworthy chain at a reasonable price than from some unknown ghost kitchen in a neighborhood corner using packaged prepared food that cannot guarantee what is inside.

I believe this is a structural demand: many urban workers are not going back to home kitchens anytime soon, given how busy work life is. That is exactly what makes labeled noodles, sausages, and retail prepared packs look rational next to a takeout order.

Instant noodles happen to sit at the sweet spot. Even after selling prices rose, absolute prices still stay low. A bag or cup plus a sausage often costs less than a ghost-kitchen meal, but it is backed by a big brand’s reputation and comes with a clear nutrition table.

Mid- and high-price bags have been taking share. Industry research cited in trade press puts mid/high-end noodle growth well ahead of low-end over 2020–2026, with the ≥5 RMB band approaching roughly half of the mix. Uni-President’s Soup Daren, Qiehuang, and Manhan Dacan lines have been part of that premium push. Korean Samyang spicy noodles also entered the competition and now rank among China’s top five brands by market share. Dry noodles and regional formats such as Akuan have widened the one-person dinner aisle beyond soup cups.

Even among my friends and colleagues, I have heard people say they genuinely like the taste of instant noodles nowadays. Many of them aren’t price-sensitive; they simply think instant noodles plus some protein and vegetables make a quick but decent meal.

Over the years, the shelf has indeed gotten better. It is no longer just the classic salty, red-braised beef cup. Brands have gotten creative with flavors (sometimes too creative, perhaps; China’s shelves now carry plenty of adventurous packs).

Tingyi’s instant-noodle segment lines up with that pattern: FY2025 noodle revenue was essentially flat, but noodle gross margin rose to 29.7%. In H1 2026, high-priced packets rose 3.3%, mid-priced packets rose 2.8%, and snack noodles (with flavor varieties) rose 7.8%.

What this means for investing in China’s food market

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We update key performance metrics of a variety of companies we cover every month through our proprietary data at BigOne Lab. You can access a free sample from previous months here to get a sense of what we offer.

In Today’s Data Update

In our September monthly view, we were explicit: we turned more bearish on Chinese assets, continuing the caution we carried through July and August. The core reason was domestic demand — consumer names looked cheap on almost every screen, but we did not think the bottom was in.

Holiday demand since then has not overturned that read. In our Golden Week Charts of the Week, China traveled more than ever but spent cautiously while doing it. Trips rose while spending per trip slipped again — the same “more trips, thinner wallets” pattern that has shown up at every major holiday this year.

Today we go one level deeper: brand-level performance, with BigOne Lab’s proprietary offline payment data as of September 2026. Several threads we flagged in our August Data Update come due this month — LV after the Molly Tea / “toilet bag” backlash, Hermès after its first soft print, Laopu as the high August base rolls off, Pop Mart’s Twinkle Twinkle’s September supply release, etc.

In today’s issue, we cover:

• Luxury goods: Q3 closed with Mid-Autumn in the quarter. We check whether LV’s slide is still deepening, whether Hermès and other ultra-high-end names that held up earlier are now turning, and whether accessible-luxury names like Coach and Ralph Lauren are still compounding into the holiday.

• Gold & jewelry: Laopu rolls off last August’s pre-price-hike rush into a lower September base. We revisit mainland store sales, buyer counts, and what secondhand gram premiums say about brand strength — plus how weight-priced jewelers and high-end names (Richemont, Bulgari, Tiffany) fared in Q3.

• Tea & coffee: Delivery platforms pulled back subsidies through the summer. We check whether the shift from apps to the storefront held into September and Q3, and how Luckin and Guming (funding their own in-store discounts) compare with Mixue, Chagee, and Starbucks.

• Pop Mart: In August, we flagged September as the demand test for Twinkle Twinkle once supply was released. We look at whether restocking delivered, how Mid-Autumn timing helped the print, and what secondary-market premiums say about flagship IP vs. new series.

• Sportswear & footwear: Mid-Autumn sits in September this year (vs. October last year, an easier base). We check how that calendar shift lands across offline vs. online, whether Nike’s inventory clearance is still reshaping peer pricing, how Lululemon looks after August’s weak China read, and which integrated and vertical brands are finding growth.

At BigOne Lab, we curate data highlights, analyze them, and deliver insights trusted by 100+ top institutional and corporate clients worldwide.

🔒 The following content is available to Baiguan Pro subscribers.

1. Luxury brands

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Some version of this question comes up in almost every conversation I have with knowledge workers in China’s major cities.

The main concern is weak domestic demand. AI may be the economy’s brightest spot, but for most ordinary people, its explosive growth has brought few tangible benefits and little direct change to their lives. (Even so, attitudes toward AI remain broadly open, with relatively little resistance.)

I think another factor shaping people’s mood is the stock market. It still has a considerable influence on sentiment among urban professionals. In June, when I was speaking with people in Shanghai, the mood was generally upbeat. After the market pulled back in July, however, recent conversations have turned more pessimistic—not just about stocks, but about the outlook for the Chinese economy as a whole.

China’s stock market is heavily driven by rotating investment themes, with one story capturing speculative attention for a stretch before giving way to the next. Since last year, two prominent themes have already gone from speculative frenzy to fading enthusiasm: robotics, particularly humanoid robots, and the commercial space sector. The broader technology sector has also faced substantial selling pressure. Many people I speak to attribute this to speculative money driving prices up before quickly exiting.

The share-price performance of two Chinese companies that listed this year—both well known internationally—may offer an illustration: memory-chip maker CXMT and robotics company Unitree.

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• Golden Week was healthier than the headlines. Total trips and spending both rose. Only spending per trip fell, by about 2%. Robert reads that as money spreading to smaller towns and to services, not as weak demand.

• Beijing is working on the monthly payment, not the price. A central-government mortgage interest subsidy for some first-time buyers is, in Robert’s view, a more important housing measure than the market has noticed. He cites Baiguan data showing a pickup in secondary-market transactions, but new-home sales are not benefiting.

• The EU-China car arrangement is, in Robert’s reading, more theater than substance. The “cut by half” is measured against an EU projection, so actual exports can still grow, and both sides can claim a win.

• The Manus outcome supports a less alarmist reading of Beijing. Robert argues the unwinding of the Meta deal was a reasonable use of existing review powers, and the company’s first independent funding round shows it is still allowed to grow.

• Consumer AI in China is held back by platform access, not model quality. More than 150 apps have reportedly blocked a ByteDance AI assistant from operating them, which fits Robert’s view that the large platforms are fighting over who controls the interface.

Golden Week: Consumers Pay for Experience, and Spending Spreads Out

Outbound travel is back, and shopping is no longer the reason

Olivia opened with an observation from Kenya. At a national park that takes roughly a five-hour drive from Nairobi on rough roads, she found most safari vehicles full of young Chinese tourists, apparently travelling independently rather than in tour groups. Robert said his parents saw the same in Norway and Iceland and described a return to the post-Covid pattern of Chinese tourists “taking over the world.” He added a base-effect point: with China’s population so large, even 10% to 20% growth in outbound travel means millions more people.

Both hosts tied this to a shift from shopping trips to experience trips. Robert pointed to a big Louis Vuitton venue in Shanghai that he doubts has an equivalent in Paris, and argued that China already offers plenty of shopping, so it is no longer a reason to fly. The same logic applies at home. He says domestic travellers increasingly choose smaller, cheaper, less crowded and less famous places over landmarks such as the Oriental Pearl Tower or the Forbidden City, which he describes as a past era of travelling mainly to bring home a photo.

How negative are the spending numbers?

Olivia cited figures from Baiguan’s Golden Week recap and noted that many headlines she saw about the holiday were negative because spending per trip fell. She added three offsetting factors: a longer holiday, more outbound trips, and more travel to lower-tier cities where money goes further.

Robert said he was surprised anyone read the data as negative. Total trips and total spending rose, and the one weak reading, spending per trip, is consistent with more people travelling to cheaper places. He sees the dispersal of tourist money across the country as a positive that lays foundations for future growth there.

Services growth, and why film is the wrong proxy

Olivia pointed to the services categories as the bright spot and linked them to the government’s stated aim of expanding services consumption. Robert agreed and addressed the usual counterexample, cinema. He argues box-office weakness reflects a global decline in cinema-going that China shares, so it is a poor proxy for Chinese service demand. He also makes a distributional argument: services are delivered by people, and per-capita income in services tends to be higher than in goods industries, so service growth helps spread wealth and supports further consumption.

Participatory film sets as an early signal

The hosts discussed a format highlighted in Baiguan’s recap: at China’s largest film and television shooting base, in Zhejiang, tourists can pay several hundred RMB to play the lead in a short drama. Robert described a friend of a friend, previously in real estate, who is trying to convert a defunct commercial property into live movie sets with supporting actors for around 100 RMB per experience.

Implication. Spending per trip is a weak standalone indicator. The episode points to trip volume, geographic spread and services categories such as sports and culture as the better gauges of where consumption is heading. Robert’s caution about the film-set business model is a reminder that the format is unproven commercially.

Read more on Golden Week consumption here:

Housing: Beijing Targets the Monthly Payment

The measures

Olivia framed housing as the main drag on consumer confidence and cited S&P Global Ratings, reported by CNBC, saying China’s property market is nearing a bottom based on comparisons with other countries. She described two recent measures. In August, Beijing tightened rules on selling unfinished homes. More recently, it announced that it will pay part of the mortgage interest for some first-time buyers of homes under 1.5 million RMB (about 220,000 USD) and under 120 square meters (about 1,300 square feet).

Robert’s argument: affordability, not price

Robert says this is one of the more impactful of a long string of incremental housing policies and that the market is not paying enough attention to it. The subsidy is only around 1% of a property’s value, which looks too small to matter. But he argues buyers think in monthly flows, comparing the mortgage payment with income, not in total price. It is also unusual for the central government to commit its own finances.

His case rests on affordability measured in years of income. At the peak, he says, an average Shanghai apartment took almost 30 to 40 years of income, and 10 to 15 years in some smaller cities. Since then prices have fallen 30% to 50% or more in some places, interest rates have dropped, and the subsidy lowers the effective rate further, to around 2% for some buyers. Total personal income has risen over the same period, although people are saving more than they consume. He says some estimates put the improvement in affordability at as much as three times, for example in Shanghai.

“You are paying less on a monthly basis for something that has less value with a higher income, which means the affordability of housing has gone up.”

Robert Wu

Robert reads current policy as a deliberate effort to keep pushing that affordability measure lower. His forecast is that the cycle ends when buying becomes obvious to the average buyer, for example when a mortgage takes about a third of income.

What the early data show, and where the policy does not reach

Citing Baiguan’s own data, Robert says secondary-market transactions in major cities such as Shanghai have grown about 20 times year on year since the subsidy was announced. Prices have not risen, and buyers are taking longer to negotiate and view more properties, but volumes are up. New-home sales are not benefiting because the policy targets smaller, cheaper homes, which are mostly in the secondary market, while new-build supply skews upscale.

Why Beijing, and why now

Robert argues that housing was historically a local-government responsibility, including construction, permits and market health, and that people have long urged Beijing to take more of it on. He sees early signs that it now is, which in his view means it can do more. On timing, he says conditions keep worsening and that people compare the present with 2024, before the September policy pivot. He thinks the country is not back there yet, but that policy is being applied pre-emptively. If the measure does not work, he expects the central government still has tools to push affordability further. This is a forecast, not an announced plan.

He also tied the policy to broader consumption. Home purchases generate demand for renovation, furniture and appliances, and sellers receive cash to spend or reinvest. First-time buyers typically buy to start families. Olivia noted Shanghai’s recent childbirth support, which Robert characterized as essentially making childbirth free. He speculated that education and daycare could follow but said he did not know. He also relayed that officials at local tourism boards told him boosting consumption is now one of their KPIs, a responsibility that once sat with the commerce department and is now shared across departments.

Asked whether central involvement carries risk, Robert said Beijing has historically been financially conservative and cautious about setting precedents, so its use of its own money here is significant.

EU and China: A Car Deal Both Sides Can Claim

China’s trade surplus with the EU was reported in September to have hit a record high, cited at around 34.8 billion USD, and Chinese exports to the EU reportedly tripled year on year in the first half of 2026 to more than 7.5 billion USD, with cars among the largest categories. The recording does not make clear the period for the surplus figure or the category for the export figure. The two sides reportedly reached what she called a “shared understanding” to moderate Chinese exports of hybrids and plug-in hybrids, potentially cutting projected shipments by more than half over four years and keeping several million vehicles out of the bloc. Exactly what was agreed remains murky.

Robert’s main takeaway is that neither side wants a trade war now, and that neither could win one. China, he says, believes it holds the stronger hand, while the EU does not want to accept it is the weaker party. He reads the outcome as theatrics. The EU Trade Commissioner’s language about cutting exports by half turns out to be measured against the EU’s own projection of Chinese exports. Exports could therefore keep growing even after the “cut,” and a projection of something that has not happened is subjective. That lets the EU claim a cut and China claim growth.

“It’s more about the policy and looking good to their domestic constituencies rather than actual substance.”

Robert Wu

Robert sees the underlying issue as competitiveness and expects the tension to return. Asked whether markets are waiting on the US trade fight or the US midterms, he agreed but said the number of variables has grown, citing the war in Iran and the war in Ukraine, and said following the news in 2026 is very different from following it in 2006.

Manus: Beijing’s Intervention Looks Different After the Funding Round

What happened

Manus launched its autonomous agent in early 2025, which drew major attention at the time. In December 2025 Meta agreed to acquire it for around 2 billion USD. Chinese regulators cited national security concerns and ordered the parties to unwind the deal, and Manus resumed independent operations in August 2026. It has now raised its first round as an independent company, co-led by Boyu Capital, IDG Capital and Tencent.

Robert’s reading: Beijing acted within its rules

Robert says most observers fall into one of two camps: that Beijing is hostile to private business and cracking down arbitrarily, or that it has a legitimate point. He places himself in the second camp and says he was among a few lone voices at the time. His argument has four parts. First, a Chinese company acquired by a foreign buyer is normally subject to approvals, much as the US reviews foreign purchases through CFIUS. Second, Manus changed its identity from a Chinese company to a Singaporean one, which he calls “Singapore washing.” By his account this happened around August or September of 2025, a few months before the deal, and he does not think the founders had the sale in mind then. Third, the founders and their investors were outspoken after the sale about how smart they had been. Fourth, Beijing could not stay silent without inviting other companies to copy the approach.

The outcome, in his view, is evidence for his reading. Those in the first camp would have predicted arrests or fines. Instead, the founders were summoned to China from Singapore, the deal was unwound, and the company was allowed to continue and raise money. Robert says he has heard it is also allowed to pursue a Hong Kong IPO provided it follows the rules. That is secondhand and unconfirmed.

Olivia asked about comparisons to the Jack Ma episode. Robert said Beijing was also reasonable in that case, in his view, but that its slow and poor communication with foreign audiences damaged its position. He thinks Beijing has since learned from that, while accepting that it can be put in a bad light even when acting reasonably.

Outlook

Robert says any IPO decision, whether in 2027 or later, will rest mainly with management and market timing, not the government. He stressed that Manus’s business is uncertain, because its early novelty has been overtaken by a crowded field of agents. His best guess is that the company remains global, with US dollar investment, and that Hong Kong is the likely listing venue. He notes that the lead investors are at least Beijing-friendly investors and corporates.

Consumer AI: The Fight Over Who Controls Access

More than 150 mobile apps, including WeChat and Taobao, have reportedly opted out of letting a ByteDance AI smartphone assistant operate them autonomously. The assistant is transcribed as “Dobell” and is probably Doubao, which needs confirming.

Robert used it to make a broader point. In his view AI is already advanced enough, and what holds it back from daily life is mundane and institutional: the large platforms control the data and the interfaces, and they are negotiating and fighting over access because he expects the outcome to be winner-take-all. He gave the example that he cannot have an AI assistant analyze his WeChat conversations because the platform does not open the door. Consumers want an assistant that can order from Meituan or Luckin Coffee, which sounds simple but cannot be done. He does not know what will trigger the breakthrough and suggested it may not come from the current generation of internet companies. He treats the ByteDance product as one of many attempts to build an AI interface that consumers adopt. As a workaround, he has been exporting about 100 WeChat chats at a time to email and handing them to AI.

“There are a lot of things that consumers want to do. They cannot, not because AI is not smart enough. It’s very smart. It’s because AI doesn’t have the data, doesn’t have the access, doesn’t have the APIs.”

Robert Wu

The shipbuilding sector is easy to miss when capital markets focus almost exclusively on AI data centers and semiconductors. Yet the industry itself has been running a simultaneous, albeit quieter, supercycle. Global demand for fleets has entered a multi-year expansion driven by aging vessel retirements and stringent energy-and-emissions compliance requirements.

In today’s newsletter, I want to discuss that quiet industrial cycle — who is ordering, why Asia (especially China) absorbs the work, and how China’s industrial map is organized. I think this trend will interest people looking beyond AI and semi, especially since it is one of the “HALO” (Heavy/Hard Assets, Low Obsolescence) trends that are less exposed to technological obsolescence.

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The context: fleet age, replacement, and green optionality

Three factors are contributing to a global demand supercycle.

Start with the ships already sailing on the water. At the start of 2026, Clarksons’ Green Technology Tracker put the GT-weighted average age of the world fleet at 13.4 years, up from a low of 9.7 years in 2013. About 39% of global tonnage is over 15 years old. Segment averages tell the same story: bulkers average around 13 years, and tankers and containerships are a bit older still.

Deferred maintenance on the world’s floating infrastructure makes replacing aging vessels a major driver of global demand.

Decarbonization is the second factor. Regulations have made carbon neutrality a hard requirement.

EU regulation is already live. Under the EU Emissions Trading System, large commercial ships (generally 5,000 GT and above) sailing to or from European ports must buy and turn in carbon “permits” to cover their pollution (reported CO₂). This rule is ramping up gradually—40% of 2024 emissions must be covered by allowances surrendered in 2025; 70% of 2025 emissions in 2026; and 100% of emissions from 2026 onward, with surrender in 2027 and beyond.

Separately, FuelEU Maritime took effect on 1 January 2025. It caps the yearly average lifecycle GHG intensity of energy used on board, enforcing stepwise reductions: −2% in 2025, −6% by 2030, and up to −80% by 2050 (measured against the 2020 reference value). Additionally, container and passenger ships face mandatory shore-power (zero-emission at berth) rules from 2030 in major EU ports.

Globally, the International Maritime Organization (IMO) is moving toward similar regulations. The 2023 IMO GHG Strategy targets net-zero emissions from international shipping by or around 2050, with interim checkpoints for 2030 and 2040. The proposed IMO Net-Zero Framework was approved in draft in April 2025, but its formal adoption was postponed, and the IMO had scheduled a resumed session for December 2026. Although the adoption of the new framework was delayed, the direction is clear, and the industry has already formed a consensus.

Ordering has moved ahead of the sailing fleet. Today, nearly half (47%) of all new ship capacity on order is built to run on alternative fuels—up from just 10% in 2015. However, because older vessels remain in service for decades, only about 9% of the active world fleet on the water can use alternative fuels today (Clarksons). Adoption is moving fastest in sectors like LNG carriers, car carriers, and container shipping, where over 62% of new capacity ordered in 2025 supports cleaner fuels. By contrast, bulk carriers and oil tankers are taking a wait-and-see approach, opting for “fuel-ready” designs that can be adapted once the market settles on a winning fuel.

Across fuels, LNG dual-fuel remains the default choice, accounting for about 80% of alternative-fuel tonnage ordered in 2025. Methanol is growing but smaller; ammonia remains tiny. About 20% of new tonnage ordered in 2024 was classified as “alternative-fuel ready” (which can be retrofitted later) rather than equipped with dual-fuel engines right away (Clarkson). Nobody knows which green fuel (green methanol, e-ammonia, or bio-LNG) will be the cheapest or most available in 2030 or 2040. Shipowners are buying flexibility for tomorrow, giving themselves the option to switch fuels as regulations tighten, and most of that flexible investment is currently going to LNG.

Korea historically dominated large LNG carriers. China, led by yards such as Hudong-Zhonghua, has closed the gap and taken a large share of LNGC orders (Drewry; trade press on China–Korea LNGC competition) during 2026.

Lastly, longer-distance demand sparked by geopolitical tensions adds another layer to global demand. UNCTAD’s Review of Maritime Transport 2025 documents Red Sea / Suez avoidance that persisted into 2025, stretching Asia–Europe and Middle East–Europe voyages via the Cape of Good Hope. Even when shipping volumes are low, longer sailing routes can keep demand high, which supports freight rates and encourages owners to buy new ships.

Of course, geopolitical factors can reverse. If Suez transit fully normalizes, some of that inflated demand will disappear. While extended routes provide a helpful tailwind for the shipbuilding industry, the two underlying structural drivers (replacement & green) remain the true foundation of this multi-year supercycle.

Global contracting in early–mid 2026 ran at a pace Clarksons linked to the record 2007 era, roughly twice the prior-decade average, after a softer 2025 (World Ports). Newbuilding prices remain elevated: Clarksons’ Newbuilding Price Index was around 186 at end-August 2026, roughly 28% above five years earlier.

Scarcity: yard capacity is the bottleneck

Strong demand alone does not make a supercycle. What makes this one last is that the world lacks enough shipyards to meet it quickly.

After the 2008 financial crisis, the industry went through a long downturn and many yards closed. The number of active large yards fell from about 325 in 2009 to about 167 in 2025 (World Ports / Clarksons). This time there has been no wave of new yards like the one before 2008. Expansion is mostly happening at existing sites, such as Yangzijiang’s new Hongyuan yard, Hengli, and Guangzhou Shipyard International. Even so, expansion is slow compared with the pace of new orders.

The scarcity shows up in delivery schedules. Leading Chinese yards are now selling slots for delivery in 2029 and 2030. Hudong-Zhonghua’s LNG carrier production is reportedly booked through 2030, and CSSC’s group schedules reach 2029 (World Ports; People’s Daily).

When a shipowner has to wait four years for a berth, the yard has pricing power. That lasts until new capacity catches up, which takes years.

How the orders split across Asia

Today, almost all of the world’s large ships are built in China and South Korea, not in Japan as much as they used to.

First, a note on units, because headlines often mix them:

• CGT (compensated gross tonnage) adjusts for how complex a ship is to build. It is a better measure for comparing Korea vs. China in terms of where they sit on the value chain.

• DWT (deadweight tonnage) measures how much cargo a ship can carry. This metric makes China’s share look even bigger.

China is the volume leader and is moving up the value chain. By Clarksons’ CGT measure, China won about 63% of global new orders in 2025, versus about 21% for Korea (iMarine News). In January to September 2026, as global orders rose 57% year on year to 70.71 million CGT, China’s share jumped to about 76%. At the end of September, China held about 68% of the global orderbook and Korea about 17% (SteelOrbis; Asiae).

China’s own DWT data shows the same trend even more strongly. In H1 2026, China booked 121.06 million DWT of new orders, up 173% year on year, or 82.3% of the world total. Completions rose 51%, and the orderbook reached 363 million DWT at the end of June (MIIT). About nine out of every ten ships China builds are for export (People’s Daily). Chinese yards are building for the global fleet, not mainly for domestic shipping companies.

China also led new orders in 16 of 18 major ship categories in 2025 (People’s Daily). Chinese yards used to compete mainly on simpler ships like bulk carriers. They now win containerships, tankers, car carriers and, increasingly, LNG carriers.

Korea builds fewer ships but still commands high premiums because it remains high up the value chain. The three big Korean builders, HD Hyundai, Samsung Heavy and Hanwha Ocean, focus on the most complex and profitable work: large LNG carriers, floating LNG units (FLNG) and naval ships.

South Korea also occupies a distinct geopolitical position, with its shipyards expanding directly into U.S. defense shipbuilding—most notably through Hanwha Ocean’s acquisition of Hanwha Philly Shipyard, which builds auxiliary vessels and missile-defense tracking ships for the U.S. military.

In contrast, Chinese shipbuilders face persistent headwinds from U.S. trade policy. Following the Section 301 investigation into China’s maritime and logistics sectors, proposed U.S. port fees on Chinese-built vessels remain a major concern. While the recent Xi–Trump meeting yielded a two-month extension of the port fee truce, this suspension provides only temporary relief and remains the single biggest wildcard for investors eyeing the sector.

China’s industrial map: who builds the ships

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The answer seems obvious. Real estate should have been one of them. Consumer sectors should have been another. For the past two decades, the most familiar Chinese growth cycle has looked something like this: rising property prices increase household wealth, stronger household wealth supports consumption, and improving consumption then feeds back into credit growth and investment. Yet two years later, the capital markets have delivered almost exactly the opposite answer.

In A-shares, Communication Services rose by about 125% and Information Technology by about 124%, while Real Estate gained only around 4% and Consumer Staples actually fell by nearly 7%. Hong Kong tells a similar story: Materials rose by about 97% and Health Care by around 74%, while Consumer Staples barely moved and Consumer Discretionary still posted a negative return.

So the bull market was real. But what went up was not what many people thought would go up two years ago. If we think of the capital market as one giant prediction market, then prices are the votes investors cast with real money. Money is not always right, but it is often more honest than slogans. Over the past two years, what the market has really repriced is not a “full recovery of the Chinese economy,” but something else entirely: where will China’s future growth actually come from?

Before going further, it is worth briefly explaining what “9/24” refers to. The term generally refers to a concentrated shift in Chinese financial policy on September 24, 2024. On that day, the People’s Bank of China, the National Financial Regulatory Administration and the China Securities Regulatory Commission jointly announced a package of measures, including reserve-requirement cuts, interest-rate cuts, reductions in existing mortgage costs, lower minimum down-payment requirements for second homes, and new tools to support the capital markets. 9/24 later became the starting point for this round of repricing in Chinese assets.

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I. It Took the Market Two Years to Go from “Buy China” to “Buy Only the Winners”

If we break down the market since 9/24, the story is actually not very complicated. There were roughly three stages. The first was a broad-based rally, when investors simply bought China. The second was divergence, when the market began to choose between sectors. The third was concentration, when capital ultimately chased only those winners that had already proved they could grow.

Stage One: Don’t Ask About Earnings—Just Buy China

The first stage ran from September 24 to October 8, 2024—barely two weeks. What the market first traded after 9/24 was not an improvement in the fundamentals of any specific industry. It was a much simpler judgment: Chinese assets had been priced far too pessimistically.

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The 2026 National Day “Golden Week” (Oct 1–7) has wrapped up, and the headline is familiar from last year: China travels more than ever, but spends cautiously while doing it. Underneath, the K-shape we flagged last year has sharpened — cross-border travel, premium stays and live experiences are growing faster than the domestic mass market.

• One calendar quirk matters for reading this year’s numbers. In 2025, Mid-Autumn fell inside National Day, creating a single 8-day holiday. This year Mid-Autumn was a separate break (Sept 25–27), with just three workdays in between. “Take 3 days off, get 13” became the season’s travel hack, so demand was spread over a longer window. Official comparisons below are therefore on a daily-average basis against last year’s 8-day holiday.

Let’s look at the key data points.

More trips, less spent per trip

China made 826 million domestic trips and spent 738.4 billion yuan over the 7-day holiday, according to the Ministry of Culture and Tourism. On a daily-average basis, trips rose 6.3% and spending 4.3% versus last year. Because spending lagged trips, average spending per trip slipped about 2% to 894 yuan — the lowest reading since before the pandemic.

This isn’t a one-off. At every major holiday this year, spending growth has trailed trip growth: May Day trips rose 3.6% against spending of 2.9%, and Dragon Boat trips rose 4.4% against 4.0%. The “responsible spending” mindset among households is now entering its fourth year since COVID.

Further, longer, smaller

The 13-day window changed how people traveled more than how much they spent. Travel platforms’ own data show trips stretching longer and farther, and spreading into smaller towns. On Trip.com, trips of 8 days or more rose from under 6% of domestic holidaymakers in 2024 to over 10%, and the average stay reached about 3.9 days [*].

Smaller towns gained the most. Fliggy’s fastest-rising destinations were small towns like Kashgar (Xinjiang), Baise (Guangxi) and Wuwei (Gansu), and Dianping said visits to leisure venues in third-tier and smaller cities rose about 1.9 times as fast as in tier-1 and tier-2 cities.

This also explains part of the per-trip squeeze. A longer rail trip to a cheaper town spreads a similar budget over more days.

Still K-shaped: quiet at home, busy at the border

Cross-border travel outgrew domestic travel this holiday. The National Immigration Administration handled 15.46 million border crossings, or 2.21 million a day, up 6.7%. Mainland residents departing the country rose 9.3% to 4.44 million.

Platform data shows how households with bigger budgets traveled. On Trip.com, the share of outbound holidaymakers taking trips of 8 days or more rose from about 29% to about 42%, Europe’s share of bookings ran at about 1.5x normal, and New Zealand orders doubled.

Domestic demand, by contrast, was spread thin rather than strong. Trip.com’s peak-day domestic orders were only about 1.75x the daily average, versus 2.4x in 2025. Earlier this year, Trip.com’s international bookings grew 40–50% in Q2 while its domestic air ticketing fell more than 20% [*].

Services over goods — again

Last year, services overtook goods as the larger share of holiday spending for the first time. This year the gap kept widening. According to State Taxation Administration VAT invoice data, sports services revenue rose 29.4% and culture and arts services 20.9%, while turnover at 78 shopping streets monitored by the Ministry of Commerce rose just 4.7%.

The drivers are the ones we covered in our experiential consumption deep-dive: live events, sports, and culture. The tax authority credited the China Open Games for much of the jump in sports spending. The Ministry of Culture and Tourism counted 180 large-scale shows nationwide, including 125 concerts and 55 music festivals, and grassroots soccer leagues such as the Jiangsu “Su Chao” and the new Northeast league kept pulling fans across cities.

Even within goods, growth came from novelty rather than staples: embodied-robot sales on key platforms rose 130%, smart glasses doubled, and exoskeletons rose 12.8%. The trade-in program drove 33.5 billion yuan of sales for 6.39 million consumers, and tax data shows phones and wearables up 119.8% and home appliances up 40.1%.

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The top of the K kept trading up — for the experience

The better-off kept paying more, as long as it came with an experience. On Fliggy, high-star hotel room nights rose more than 80% over the long holiday, ahead of roughly 70% for all hotels. Qunar users who stayed five days or more booked 40% more high-star hotel nights than others.

What they bought was the experience around the room. Meituan’s top destinations for high-star hotels were Lijiang, Dali, Yan’an, Huangshan and Yili, and the Grand Hyatt Kunming, which bundled rooms with sailing and mushroom foraging experience, saw bookings jump 275% in the first three days. Fliggy reported a 60% rise in immersive and role-play attraction tickets.

Which experiences worked?

Not every experience works. Golden Week box office came to just 1.15 billion yuan, a 12-year low and down from 1.84 billion last year.

The money went instead to experiences you have to show up for. Tax invoice data shows amusement parks up 41.2%, grassroots sports and cultural events up 28.3%, and artistic creation and performing arts services up 21%.

In Hengdian, Zhejiang Province—China’s largest film and television shooting base—tourists can now pay several hundred yuan to experience being a lead actor or actress as a unique attraction. As short dramas go viral, many tourists love to play their favorite characters, recreate iconic scenes, and potentially become the next big social media hit.

Theme parks were the clearest winners. Shanghai Disneyland and Universal Beijing were the two most-booked attractions on Trip.com, and Qunar said interest in Shanghai’s new Legoland was up over 40%.

Concerts and sports events became reasons to travel in their own right. Nanjing’s 10 large shows drew 194,000 people and 172 million yuan in ticket sales [*], and Jay Chou’s three Qingdao shows sold 150,000 tickets, lifting nearby hotel bookings 36% on Meituan.

Experiences that are social, participatory, and hard to replicate at home are winning. People also paid to learn something or look after themselves: Meituan searches for makeup lessons rose 377%, pilates classes 133% and tennis coaching over 100% [*], and the tax data flags pet services, fitness and beauty as fast growers.

The bottom line

Golden Week 2026 confirms two things.

First, the consumer is still K-shaped: volume is there, but per-capita spending at home keeps slipping while the better-off spend abroad and on premium stays.

Second, the shift from goods to experiences is not a one-holiday blip — it’s the structural trend of Chinese consumption now. The winners are businesses that sell something irreplaceable: experience-led hotels, live events and IP.

So has consumption bottomed? We’ve been tracking that question all year with our proprietary data. If you want to go deeper:

• Has China’s consumption bottomed — and what it means for Chinese equities.

• Which consumer brands are actually growing, from our offline payment data. Our August consumer data report tracks Louis Vuitton, Laopu Gold, Luckin, Guming, Pop Mart, Nike, Lululemon and more.

• The experiential consumption basket.

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On almost any weekend in China this year, somewhere, a few hundred people are trying to get a working product up before Sunday night.

The people in those rooms keep getting younger. Scroll Red Note or Douyin, and you’ll see a steady stream of kids showing off what they’ve built with AI. A 10-year-old made an award-winning game by chatting with AI. A 13-year-old uses AI to teach vocabulary to millions of followers. At Red Note’s first hackathon in April, one team averaged 13.5 years old and still took home an award. Parents are signing kids up for AI coding classes, and the Ministry of Education and 17 other departments have stated goals to broadly expand basic AI education in primary and secondary schools by 2030.

Hackathons are where a lot of this energy ends up. They are free to enter, often generously funded, and now happen almost every weekend. In today’s newsletter, I want to take you behind the scenes of China’s recent hackathon boom and look at what Chinese communities are building. We’ll explore what this means for AI commercialization, the country’s talent pool, and the business behind weekend hackathons—which are becoming a lifestyle for many in China today.

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From a few a year to almost every weekend

For most of the last decade, hackathons in China were a niche, insular thing popular only among the developer communities. The format arrived around 2012 through the developer community SegmentFault and stayed mostly inside tech companies and coder circles. Almost everyone in the room was a programmer.

That changed fast. In a September feature, China National Radio quoted a developer who judges these events regularly: he now sits on as many hackathon panels in a single month as he used to in a whole year. By early September, the Greater Bay Area (Guangdong–Hong Kong–Macao) alone had hosted 28 hackathons in 2026. In Beijing, Shanghai and Shenzhen, hackathons now run nearly every month. A campus startup site tracking the calendar counted dozens in August and September alone, and struggled to find one that wasn’t about AI.

Some of these hackathons are enormous. ByteDance’s TRAE AI Creativity Contest drew 37,000 sign-ups and 14,000 submitted products. Zhihu’s spring hackathon had more than 3,600 participants, from a 13-year-old middle schooler to a medical PhD.

The catalyst of the booming hackathon scene is simple: building got cheap. When you can describe a product in plain Chinese and an agent writes the code, a 48-hour sprint stops being a coding contest and turns into a product contest.

In March, an agent-building contest in Beijing's Zhongguancun didn't even ask for code; entrants just showed what their agent actually did, and judges scored real-world value. Out of several hundred entries, the champion was a 14-year-old eighth-grader, Jiang Muran, whose ClawFounder turns an idea into a launched product on autopilot. He took home ¥200,000 plus 10 billion tokens.

In my piece on the one-person company boom, I noted that 75% of Chinese solo founders now come from non-technical backgrounds. Many of them get their first rep at a hackathon.

The high schoolers who built the stage

China’s builder community is getting younger. This summer, AdventureX, the country’s biggest youth hackathon, took place in Hangzhou and drew about 9,000 applicants for 800 spots. The average participant was only 21, and each had access to a pool of ¥20 million worth of AI credits, robot kits, 3D printers, and drones.

AdventureX, however, was not born out of the AI boom. Zhu Haoyu, a Hangzhou high schooler who goes by Ryan, had been slipping into overseas university hackathons using his older sister’s ID. After a loss at an international student competition, he decided to run his own.

From the start, AdventureX had a slightly rebellious, unconventional streak. He and classmate Xu Chen, both juniors at Hangzhou No. 14 High School at the time, set a few rules: no entry fee, free lodging and prizes, and five days of building. But participants had to be under 26, because Ryan and his team wanted builders who were not seasoned startup veterans or cogs in big-tech machines. To find real builders, Ryan also put behavioral questions into the application form, such as: “If you met a Martian, how would you introduce humanity to them?” One answer delighted him: “Shoot the Martian.”

The first edition in July 2024 had 247 builders and 67 projects. The founding team got ZhenFund partner Liu Yuan to take part, and persuaded Hangzhou’s Hupan Innovation Center to provide the venue and meals.

Two years later, AdventureX 2026 was the biggest youth hackathon in China this summer. The organizers planned for roughly 700 domestic and 100 international participants, and cumulative foot traffic over five days passed 60,000. There was a ¥1 million prize pool, tents and sleeping bags for people who didn’t want to go back to the hotel, and a Woodstock-style music night on the final evening. This year the team also open-sourced a 50,000-word hackathon playbook, saying it wants 100 cities and 1,000 student groups to run their own.

The overall 2026 champion, per a community-compiled winners guide, was Pengiu, a smart pet collar that helps dogs socialize and make friends. Other winners paired AI with earbuds, smart glasses and a quadruped robot. Because the participants were young, many were not constrained by textbook ideas of success and built products around their own interests and needs: recording fragments of daily life, AI companionship, sleep health, solo travel, and smarter ways to rest.

You can view AdventureX’s gallery to see other submitted and winning projects this year: https://gallery.adventure-x.cn/projects. (Not sponsored; just for anyone interested in checking out what kinds of applications and products are being built at the event.)

One number is worth pausing on. How much are the projects coming out of AdventureX actually worth?

That number may or may not hold up. But I think the core takeaway is something else: we are seeing a new, younger generation of Chinese builders who are tired of climbing the corporate ladder and ambitious enough to aim to become world-class entrepreneurs and innovators.

In the team’s year-end essay, Ryan wrote in his own blog:

There was once a question that stung us deeply—the famous Qian Xuesen’s Question:

“Why do our schools always fail to cultivate outstanding scientific and technological innovators?”

Today, 20 years later, we believe AdventureX is providing part of the answer:

True innovators emerge only when evaluation systems shift from exam papers to creation, and when students are encouraged to explore the unknown and solve real-world problems rather than mechanically memorize and test-prep. We are putting this vision into practice.

Who pays for a free weekend?

For the young builders, a hackathon is a stage. For many others in the room, it has become a real business. AdventureX is free to attend, and so was the Zhongguancun contest Jiang won: free meals, free hotel rooms, free compute, cash on top. Someone is paying for it all, and each of them is buying something specific.

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Shortly after September 24, 2024, I wrote a piece called “The Leopard Changes Its Spots.” I was trying to understand why policy had changed, and what might follow. That piece is no longer available (maybe it’s a bit sensitive to discuss the motives behind such a watershed policy change), but the questions are still worth returning to. We now have nearly two years of data to look at.

Some of the results are fairly clear. Stocks have risen substantially. Local governments pay lower interest rates and have longer to repay their bonds. That has eased the immediate pressure on their finances, even though the amount they owe has increased.

Other results are less encouraging. Households are borrowing less, private investment is falling and spending remains weak. Exports and technology businesses are doing much better. So the question is no longer just whether the economy has improved. It is who has seen an improvement, and why others have seen very little.

Data through August 2026 unless noted.

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The first thing to change was the market.

The stock market is a useful place to start, because the change there has been so visible.

From the last close before the announcement to September 18, 2026, the Shanghai Composite rose 42.3%. The ChiNext Index more than doubled, and the STAR 50 gained 157%. By this measure, the effort to restore confidence in the market has worked.

The differences between those returns tell us something too. The indices with more technology companies rose much further. Anyone who owned those stocks has good reason to feel that the past two years have gone well. But most people judge the economy by their pay, their job prospects and the value of their home. A rise in technology shares does not necessarily change any of those things.

Some parts of the economy have done much better than others.

The same difference appears in the economic data. Exports, electronics and high-tech manufacturing are growing faster than they were in 2024. Retail sales are growing more slowly, while investment and property development have weakened. Some of the growth rates in these two groups are now more than 20 percentage points apart.

China has a large and growing role in AI, and many of its manufacturers are doing well overseas. These businesses account for much of the encouraging news in company earnings. At home, however, shops, property developers and many smaller businesses face weaker demand. Their customers are the same households that remain careful about spending.

There is no reason to dismiss the progress in exports and technology. The difficulty is that it has not yet led to a similar improvement in incomes and spending across the country. This is why reports of strong growth in particular industries can seem so far removed from everyday experience.

To see where the recovery has been slower, it helps to look first at what households are buying, and then at whether businesses are willing to invest.

Household spending is still growing slowly.

In the first eight months of 2024, retail sales grew 3.4%. In the same period of 2026, they grew just 1.1%. Sales at large retailers fell. Online retail was still growing, but at a lower pace.

Car sales explain a good deal of the weakness. After trade-in subsidies were expanded, car retail sales rose 6.6% in November 2024. The improvement did not last. Some buyers may have brought their purchases forward to use the subsidies. By November 2025, sales were falling by more than 7% from a year earlier. In August 2026, the decline reached 18.5%.

The unemployment figures need a closer look.

People are more likely to spend when they feel secure in their jobs. The overall unemployment figures offer some reassurance: the surveyed urban rate averaged 5.2% in the first eight months of 2026, unchanged from the same period of 2024. But that average covers people in quite different circumstances.

Among migrant workers with rural household registration, unemployment rose from 4.6% to 5.0%. Among 25–29-year-olds, it rose from 6.9% to 7.5%. The weakness in property and construction may help explain the first increase. The second suggests that people in the early years of their careers are also having a harder time finding work.

The unemployment rate also tells us little about the quality of the work people find. China has more than 200 million people in flexible employment. An earlier official survey estimated that roughly 84 million worked in newer forms of employment, often through online platforms (the gig economy).

For some people, flexible work is a welcome choice. For others, it is what they can find after losing a more secure job. They still count as employed, but they may earn less, have fewer benefits or find fewer opportunities to learn skills that will help them later. A stable unemployment rate can miss these changes.

Businesses are holding back on investment too.

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Market commentary: the September tape

September was the month the rest of the world bounced, and China did not. Nearly every major market recovered some ground this month, but Chinese assets kept sliding. CSI 300 is down ~6% over the month and ~12% over three months.

The CSI 300 index level hides the market breadth problem. The share of CSI 300 constituents trading above their 200-day moving average peaked in October 2024, following the unprecedented “9/24 policy stimulus”, and has fallen continuously ever since — including through this year, when the cap-weighted index was making new highs.

This visually illustrates the “K-shaped” divergence: a handful of mega-caps, mostly semiconductor and tech names boosted by AI demand, have been holding the index up, while most domestic-oriented stocks haven't crossed their 200-day moving average since.

We flagged that divergence in our Charts of the Week series earlier this summer and in our last monthly view: consumer names looked cheap on almost every screen, but we didn't think the bottom was in. That call has played out since July.

Our proprietary data says the same thing from the ground up. In our August update, we saw luxury keep declining, brands under pressure, and the brands that held up best (Luckin, Guming, for instance) did so by funding their own discounts.

One more update on last month. We named Chinese open-source models capturing global token share as a possible re-rating catalyst. It looks weaker today. In our view, that narrative never built real momentum in the capital markets: the listed LLM names (Z.AI, Minimax) in Hong Kong have been declining since July but still are not cheap on price-to-sales.

Recently, a new narrative is taking shape around whether open-weight models are losing the momentum needed to catch up. As frontier labs increasingly hide their chain-of-thought, distillation becomes harder, and the pace of closing the gap becomes more difficult to maintain. While we don’t have strong evidence yet, this could be a potential narrative shift to watch for, as it may cast a more pessimistic light on Hong Kong-listed Chinese tech names whose valuations require growing global market share to justify.

Since we launched Baiguan Pro, we’ve built several baskets to track other themes that could come under the spotlight beyond AI and semiconductors. For instance, our two latest:

• The power grid trade, where State Grid’s RMB 4 trillion 2026–2030 capex makes volume structurally supported

• and the shift from buying things to buying experiences, where services retail has been outgrowing goods.

We will continue diving into themes and sectors to help readers gain a deeper understanding of how to express thematic trends in the Chinese equities market.

Our Views This Month

The bottom line: we are lowering both A-shares and Hong Kong this month.

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is a principal consultant in the China practice of The Lantau Group, an energy economics and policy advisory that works with industrial power buyers and investors across solar, wind, nuclear and coal assets. He writes Crossing the River by Feeling the Stones, a Substack on China’s emerging and lower-tier cities.

Episode in Brief

• China’s “clean energy leadership” claim rests on a different definition than the West’s. Beijing frames leadership as enabling other countries’ decarbonization through mass technology exports and production volume, not necessarily as having phased out coal at home — coal alone still supplies roughly half of China’s 2025 generation mix.

• China’s renewable-build targets are negotiated between industry and policymakers rather than imposed top-down, which Fishman says is why the country has repeatedly “underpromised and overdelivered” on clean-energy goals — and why the same pattern could hold on the 2030 peak-carbon target.

• Energy is one of the sectors most directly run by the state, unlike China’s more bottom-up AI buildout. Local officials originate and pitch most projects; only genuinely national moves — cross-provincial power trading, a national data-compute strategy — originate in Beijing itself.

• The Medog Hydropower Station, a $160–170 billion, 60-gigawatt project targeting 2033 completion, will generate roughly as much electricity annually as a mid-sized country consumes.

• Western restrictions on Chinese clean-energy equipment (Chinese suppliers reportedly account for roughly 80% of EU inverter shipments) raise a tradeoff Fishman says hasn’t yet been convincingly argued: national security versus decarbonization speed.

What “Clean Energy Leader” Actually Means

Fishman opened by complicating the premise of the question itself: “leadership” needs to be defined, and China’s own version of it is not the one usually assumed in Western coverage. Beijing’s implicit standard is enabling other countries to decarbonize by supplying clean-energy technology at scale and low cost — solar panels, batteries, EVs — rather than a race to eliminate domestic emissions fastest. Both things can be true at once: heavy technology exports and a domestic grid still slightly over half thermal.

China’s own 2025 generation mix backs up that tension. Fishman’s estimate: about 55% thermal (roughly 51% coal, ~3% gas), just shy of 36% combined wind, hydro and solar, another 2-3% nuclear, and the remaining ~5% split between biomass, wave and other small sources.

On the pace of change, Fishman argued China’s official targets are structurally conservative because of how they are set: less a hard number imposed from above than a negotiation, with policymakers asking industry what it believes it can do, then testing whether it can do more. That process tends to produce targets industry is confident of hitting — and sometimes beating by a wide margin, since recent five-year build targets have in some cases undershot the country’s own trailing three-year average.

Fishman’s read is that the country’s targets are calibrated to be beatable, which has been the recent pattern.

“There’s been a lot of underpromising and overdelivering in the near recent past in the Chinese energy sector.”

— David Fishman

From Process Innovation to “Zero to One”

Fishman also flagged a shift in the character of China’s clean-tech edge. For years the country’s advantage was “process innovation” — making an already-proven technology like solar cells incrementally cheaper, faster or more efficient, driven by intense domestic competition. He now sees genuine “zero to one” innovation emerging in areas that are not yet technologically proven anywhere, citing next-generation batteries and downstream hydrogen derivatives as examples.

“Some zero to one innovation is happening in clean tech now in China, whereas China was previously known for one to one hundred, iterating an already existing concept.”

— David Fishman

Beijing Sets Direction, Local Governments Drive Execution

Asked how national priorities actually turn into projects on the ground, Fishman drew a sharp line between “Beijing support” and provincial or municipal support. Most energy projects — a data center, a solar farm — originate locally: officials pitch the idea and seek approval upward. Only genuinely national-scale moves, like cross-provincial power trading (sending hydropower from Sichuan to eastern China) or a national data-compute strategy, originate in Beijing itself.

“Local government officials in China are not principals. They are agents themselves. They are pursuing certain activities in response to their own incentives — they want career advancement, or they’re just trying to interpret national-level policy.”

— David Fishman

Fishman contrasted this with AI, where the buildout looks far less state-directed and more the product of disaggregated private activity responding to a policy-created ecosystem. Energy, the nuclear sector and grid development, by comparison, sit squarely inside the state’s direct sphere of influence.

On policy risk specifically, Fishman was direct: change happens, but it is never a reversal — only a “course adjustment.” His example was the shift away from guaranteed feed-in tariffs toward market-priced electricity sales, a change individual power-plant operators dislike but that he says most economists view as the correct design move. Unlike the US, where recipients of a policy change can lobby directly and sometimes reroute it, in China that feedback runs through state research institutes and universities: affected companies can get details softened, but they cannot block a change they oppose.

“It’s not a new direction. It’s never a reversal of previous policies. It’s a course adjustment.”

— David Fishman

Fishman’s framing: policy risk in China’s energy sector is directional and negotiable at the margins rather than existential, though a feed-in-tariff-style repricing can still hit the economics of an existing asset hard.

Inside the Medog Hydropower Station

The episode’s centerpiece was the Medog Hydropower Station, the subject of a recent Fishman article. The project features an unusually steep “hydraulic head”: the Yarlung River drops roughly two kilometers in elevation over a 200-kilometer horseshoe bend. Rather than following that bend, the plan is to drill a 40-kilometer tunnel straight through the mountain and route the river through it, capturing the elevation drop as power along the way.

“This is not a low-hanging fruit project. This is the highest fruit on the tree type hydropower project.”

— David Fishman

Transmission is the open question. Fishman said only one route is publicly confirmed — a high-voltage direct-current (HVDC) line toward the Greater Bay Area in Guangdong, likely terminating in Huizhou, though he flagged that specific city as not fully certain. Sixty gigawatts will need several more lines; he estimated three to eight HVDC routes in total. On how that power gets absorbed once it lands, Fishman made a fungibility point worth remembering: grid operators elsewhere in the country cannot tell where incoming electricity originated, so new low-cost supply simply displaces whatever is the highest-cost or highest-emission generator in the local mix.

Data Center Attitudes

On data centers, Fishman said the topic barely registers with ordinary Chinese people, for a structural reason: residential electricity pricing in China is shielded from market movements, so there is no equivalent of the US fear that a local data center will push up household power bills. Chinese media coverage reinforces this by framing data centers as high-tech development news rather than a public-interest or community-impact story.

Security Pushback

Olivia raised US and EU restrictions on Chinese clean-energy equipment on cybersecurity and supply-chain grounds, citing a Wire China report that Chinese suppliers account for roughly 80% of inverter shipments into Europe. Fishman’s response set a specific test for whether that policy makes sense: a country is entitled to define its own national-security standards, but if the replacement supply chain it builds slows its own decarbonization effort, it has implicitly ranked a national security concern above a global one — a tradeoff he said has not yet been argued for convincingly.

“Ensure that the alternative you choose — be it a different supplier or cultivation of a domestic supplier — doesn’t slow down your effort to build out your decarbonization infrastructure. If it does, then you have prioritized a national security concern over a global security concern.”

— David Fishman

He also looks at the opportunity side: can the correction that follows regulatory action create good entry points? Moutai’s share price rose 10x in the six years after the Eight-point regulation triggered a sector-wide correction. This can be relevant for investors looking at names like Futu, Trip.com, and other listed companies going through regulatory scrutiny.

Pandawatch‘s real name is Enrique Becerra, a Hong Kong–based investor who has managed his own capital full-time since 2017 with a focus on China A-shares and Hong Kong-listed equities. He is the author of the monthly letter “Investing in China” and tweets as @pandawatch88. Based in Hong Kong since 2007, he spent 16 years as an investment banker at Citi and Bank of America Merrill Lynch.

What follows are his slides and speaking notes.

Enjoy!

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My topic today is the impact of regulatory episodes on stock prices.

Many things define a company: the product, the competition, growth, pricing power. As investors, we spend a lot of time evaluating these.

Regulation sits above all of them. Watching. And has the power to make our very thorough analysis irrelevant in a single day.

When regulation hits a company’s moat, the valuation can change a lot.

LETS PLAY A GAME.

Here are 3 examples of regulators targeting listed companies.

You have to guess the country:

The left column tells you the policy concern behind each regulatory action.

• First row: education stocks fall 90%. The regulator decides schools are squeezing too much money out of students and families, and forces a change in the business model. Sounds familiar? Where could this be?

• Second row: online broker stocks drop 40% after the regulator calls them out for operating in grey areas without a license.

• Third row: the regulator is concerned about the high costs associated with consumer loans, and takes action. Share prices fall 60%.

Guessed the country yet?

China, you say? Did someone say the US?

…

…

And the answer is…

Good news! The answer is both, US and China. Everyone’s a winner.

Similar policy concerns, similar damage to share prices from regulatory action.

• Education: In 2010, the US administration went after for-profit colleges. The sector collapsed, stocks fell 90%, bankruptcies followed. In China, the 2021 measures against after-school tutoring have since been widely cited as proof that China is “uninvestable” (conveniently forgetting what happened in the US a decade earlier).

• Online brokers: Coinbase and Futu both dropped 30-40% after regulatory action. The SEC accused Coinbase of operating as an unregistered securities exchange and broker. The CSRC fined Futu for serving mainland residents without a domestic license.

• Consumer lending: FICO is a long-time favorite of US quality investors, widely considered to have a deep moat. Then one day, the new head of the Federal Housing Finance Agency decided it was time for some competition in credit scoring. The stock is down 60% since. In China, fee and rate caps on online lenders, also aimed at cutting cost of borrowing for consumers, have produced a collapse in the share prices of online consumer lenders over the past year.

One lesson here is beware of using national flags to underwrite your comfort level.

But there is an important difference: implementation speed. The US goes one company at a time, keeping the blast radius contained. China can do everything, everywhere, all at once. In the US, a full drawdown can take 2-3 years. In China, it can take a week. China speed is called.

An interesting finding across 25 examples: two different countries, one ocean apart, yet the policy concerns behind their regulatory actions, and the impact on share prices, are remarkably similar.

Take the first row, duopolies squeezing fees from merchants. The Durbin Amendment sent Visa and Mastercard down 25% in 2010. Meituan and Trip.com fell 20-35% when SAMR launched its unfair competition probes.

I wont walk through every row, the tables speak for themselves.

Another example: in the first row we have companies that ignored the referee and pushed ahead with a deal. These can get reversed in both the US and China, and stocks tank.

So, given these patterns, can we use them to predict who is at risk?

I ran all the examples through AI models: Fable, Astra. Civilizations of agents worked on them. And what they found is…

What they found is six flags, listed in the left column. These flags are the conditions that were in place before the regulatory action hit. The second column shows how many of the 25 examples had each flag.

The flag in row #6 was present in 24 out of 25 cases: “The narrative is already in print.” Government leaders and regulators had already flagged the policy concern repeatedly in speeches and op-eds before acting. Let’s look at an example:

• China’s after-school tutoring sector went through 3 years of warnings until it was eventually dismantled

• The sector had been first singled out around the NPC/Two Sessions in 2018 and 2019 as a source of excessive academic pressure on students and rising financial burden on families.

• In the run-up to 2021, regulators and state media frequently criticized aggressive marketing and pricing abuses. Investors paid little attention and stocks kept rising to as much as 90x PE.

• Less than two months before the “double reduction” regulation, regulators fined 15 tutoring firms for false advertising and price-related violations.

Not every criticism leads to action, of course. Those cases wouldn’t be in this table. But the reverse, action with no prior criticism, barely seems to happen.

The second most common flag is row #5: “companies doing very well, but people complaining about it.” Present in 21 out of 25 cases. Good news for some: if parts of your portfolio are underperforming, relax, nobody regulates the companies nobody cares about.

So is the conclusion to avoid all these flags?

No. Avoid everything with regulatory risk and you’ll miss some great returns. Visa and Mastercard have done 20x-100x since IPO despite constant regulatory overhang. Meta has gone up 4x since Cambridge Analytica opened the floodgates of persistent regulatory scrutiny on social media.

What we can do is manage on the aggregate:

• Know how much of your portfolio is under notice. Count the flags and put a risk budget on the exposure. Make sure the reward compensates for the risk. Assume these names can fall 50%. Means you need to see 2-3x upside to be interested.

• Balance the portfolio with lower-risk names. Companies not on notice, companies that don’t add to the cost of prosperity, companies the regulator actually wants to accelerate, regional SOEs, etc. Don’t just own the MSCI China.

Last slide. Who recovers from a regulatory storm?

The x-axis shows share price performance from the bottom. The right half contains companies that fully recovered as well as those where buying on the news made money even without a full recovery.

The y-axis shows business performance. The bottom half contains companies whose businesses never fully came back.

The contrast between the strongest and weakest performers shows what to look for:

• Moutai was a 10x after the 2012 regulatory action. The core value is in the product (people love it) and the regulator didn’t touch that. The regulator went after the system around it (banquets, official gifts). The product eventually found new routes to its fans.

• Visa and Master also 10x’d after the 2010 action. Their core value is in the system (the oligopoly) and the regulator left that untouched, targeting only part of the product (debit fees). The system remained in place.

• Companies where the core value itself got hit end up in the bottom left. Bank financing was part of the core value of Chinese real estate developers. Government financing and bank support were part of the core value of for-profit colleges in the US, and of private prison operators. They disappear or never fully come back.

In the middle are companies where the blow isn’t fatal to the core value, but competitors can take advantage while management sits in the penalty box. Many argue this happened to Microsoft in the 2000s, a lost decade for the share price while management focused on preventing a break-up. Alibaba lost significant share to PDD and Bytedance during its period under regulatory scrutiny.

What about the current cases?

• FICO: their core value is in the system (the mandated nature of credit scoring and its monopolistic position), not in the product (nobody would pay for it if it weren’t required). The system is what got hit. This could be bottom-half territory.

• Futu: their core value is both system and product. Users like the product. But the company was also exploiting the system by serving mainland residents without a license. That part is gone. But two-thirds of the business remain untouched. The valuation down by 1/3 seems to reflect this already (simplistic approach, there’s nuance of course).

• Trip.com (TCOM): also a mix. System in the form of a dominant market position that forces terms on merchants, but also product as users genuinely like the app. What got hit is the system. How much damage that does depends on competitors. TCOM can go the way of Meituan if competitors fail to show up (SAMR’s probe barely dented the business, EBIT went up and shares recovered), or the way of Alibaba if they do. That’s what I’m watching. And just this week, SAMR summoned TCOM’s competitors over unfair competition concerns, which is probably a relief for TCOM management.

To wrap up, three takeaways:

Pay attention. Know how much of your portfolio is under notice.

Manage on the aggregate. Make sure risk-reward is attractive. Balance the portfolio with lower-risk names.

After regulatory action hits, identify the core value. Only buy if the regulator has left it untouched.

fin

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Pandawatch

In Hong Kong since 2007. A blog to keep my notes about what’s going on with Chinese companies and markets. Public portfolio, so you can see my biases and discount accordingly. Wine reviews, to add sophistication.

One small, embarrassing detail about that article was that although we can apply our common-sense understanding of China’s institutional mechanisms to appreciate Hefei, the Baiguan team has never been to that city personally! On a face-to-face basis, the city remained a mystery to us as well as to you.

That’s why, when an opportunity recently arose for a group of investors to visit Hefei and ask whether we were interested in tagging along, we happily joined.

It was an intense 3-day tour during which we visited 20+ companies, funds, research institutes, and government support agencies. We walked the campus of the formidable Chinese University of Science and Technology (CUST), and were even lucky enough to tour some exhibitions of Hefei’s impressive controlled fusion program.

Below are some of our key takeaways from this trip.

It’s all about the people factor

A perennial question that’s stuck in our minds during our visit was: why Hefei, an otherwise unremarkable inland city, of all places?

If you read our previous article, you know our theory that it was the unusual sequence in the leadership continuum, which is a bug, not a feature, of China’s local government system, that’s mainly responsible for Hefei's success.

But this idea was far from obvious. For instance, one participant in our tour, a seasoned tech investor, believed that the proximity to CUST, China’s equivalent of MIT, and its endless flow of top talent had a big, if not the biggest, impact.

During our visit, we had a great opportunity to pose the same question to Mr. Y, a founding CEO of a government venture fund, who has seen it all.

Mr. Y’s sharing confirmed Baiguan’s view. According to him, Hefei had the luxury of having a continuous streak of leadership for more than a decade, something quite rare in China’s local government politics. He said that when public-sector peers from bigger cities like Suzhou, Nanjing, and even Shanghai and Shenzhen came to visit Hefei, everyone marveled at this unusual endowment. This continuum made Hefei the only city in China uniquely positioned to think and plan independently and patiently over a 10-20-year timeframe, and invest in future industries under the same timeframe.

Mr. Y also broadened our perspective by pointing out a second, closely related factor. Under the leadership continuum in the past, an entire echelon of cadres and professional managers sharing the same culture and consensus has already been formed. Today, even if leadership changes hands, the backbone of the bureaucracy stays the same, leaving modus operandi intact.

The lesson of Hefei is thus one of many reminders that, despite the mesmerizing technological advances of today’s world, people remain at the core of making or breaking things.

Success breeds itself

Talking about people, during our visit we constantly marveled at the sheer energy and passion of those we spoke with, which was a bit different from what we found in other places in China. We have the feeling that those people really care about what they are doing and have a strong sense of mission. Even the government bureaucrats we talked to have a distinct vibe to them that we don’t easily find elsewhere.

On top of that, we feel that the people in Hefei have a strong sense of belonging. Chinese culture in general harbors a strong homesickness, yet what we see in Hefei is different. There, we saw many top talents who would easily prefer to stay in cities like Beijing and Shanghai but willingly came back to their hometown. This is quite unusual in China, where usually the “tier” of a city is strongly correlated with the level of talent it can attract.

How is Hefei able to achieve this remarkable feat? We can’t find anything inherent in Hefei that helps it attract talent better than other cities in China. The truth seems mundane here, and nothing other than the fact that its model has proven to work.

Good results breed confidence, and confidence attracts more talent, who in turn will help Hefei achieve even better results. This demonstrates that the original farsightedness of Hefei’s previous municipal leadership not only produced industry champions but also laid a solid foundation for continued, self-reinforcing success.

This also shows the difficulty of someone else replicating Hefei once a certain critical mass has been reached.

Investing in 20-year technologies does not mean the rewards can only be reaped in 20 years

Hefei is now globally famous for its large risk appetite for investing in long-term strategic industries, even far-fetched moonshots. The assumption is that Hefei has to endure years, even decades, of loneliness before a long-term bet yields any results.

The reality, however, is far more nuanced and far more practical.

If a technology can only be mature in 10 years, it does not mean its positive impact won’t be felt until then. An often-cited concept in Hefei is “沿途下蛋” or laying eggs along the way, meaning that a strategic industry can usher in other supporting industries that may bear fruit earlier than the core industry.

Take controlled nuclear fusion as an example. Industry estimates for maturation usually fall within a 10-20-year timeframe. But to make it happen, a whole suite of technologies has to be mature as well. For instance, nuclear fusion requires advanced superconducting technology to work. Yet without a huge investment in nuclear fusion, there simply isn't a large enough use case to make superconducting economics scale. In this regard, nuclear fusion is no longer just an end in itself but a means to help related industries to advance as well.

Similarly, at the nuclear fusion institution we visited, we also see great advancements in areas ranging from specialty, complex AI algorithms to vacuum technology that are a must-have for fusion, which individually may have use cases beyond just fusion and are highly likely to be commercially viable before fusion.

There should have been way more M&A activities

In Hefei, we saw a great many high-quality technology companies working in niche sectors. In one example, a company used inexpensive sound-based solutions to do defect detection and prevention on oil and gas pipelines and data center batteries. Another company was a niche eVOTL player that focuses on ultra-small, ultra-low-altitude flying cars that a rancher in Australia can easily use to drive around his ranches without requiring a flying permit.

The consensus today for these companies, as well as for the investors who chose to back them, is that they should go public one day. Yet we question whether the IPO path is the correct one for many of the companies we saw. It appears to us that the more natural, and healthier path is actually for those niche companies to be acquired by larger companies with a more integrated product suite and more mature distribution networks. Yet so far, we have failed to observe a meaningful enough number of interesting M&A deals in Hefei.

Strong hardware, weak software

Our 3-day visit was saturated with complex sci-fi devices of all kinds, and our minds swam through a high density of undaily concepts, from pulsed plasma thrusters to nitrogen-vacancy sensors. Yet, we fail to find any companies (other than perhaps Zepp, a fitness tracker maker) that produce interesting products directly for consumers, nor do we find interesting service companies.

That sturdy, serious vibe is felt everywhere. One perhaps unrelated anecdote is that when we toured the CUST campus, it did not feel like a college campus at all, lacking the youthful energy people tend to associate with college life. “I can’t find a single good-looking face”, one of us exclaimed. Maybe that’s the price we pay for having a university that may breed China’s future Einsteins?

Hefei is a microcosm of China’s broader industry landscape of today. Just like the rest of China, Hefei has an extremely strong hardware and deep-tech ecosystem. But when it comes to consumer technology and the services sector, the city barely exists. This is why during the go-go years of China’s internet boom, you won’t be able to find Hefei on the map. Hefei’s moment to shine only comes when the entire world has entered a tech hardware supercycle.

We do not expect Hefei to only double down on this imbalance. And we believe it should. Every city in China should carve out its own distinct identity and help foster greater diversity at the national level.

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Related reads

We update key performance metrics of a variety of companies we cover every month through our proprietary data at BigOne Lab. You can access a free sample from previous months here to get a sense of what we offer.

Before today’s post — a quick note. Applications are still open for the 2026 Autumn Baiguan China Tour:

• Robotics & AI Executive Tour in Beijing from Oct 19-23

• Advanced manufacturing in Foshan and Shenzhen from Oct 26-30 (4.5 days)

You can check out the pricing and RSVP here:

Please feel free to contact us at Baiguan_ChinaTour@bigonelab.com with any questions.

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In Today’s Data Update

August’s data left us cautious about calling a bottom in Chinese consumption.

China’s two-speed economy tilted further in August. Retail sales grew just 0.4% year-on-year, the slowest pace since May and a second straight monthly slowdown, while industrial output accelerated to 5.2%.

With July’s typhoons out of the picture, August is a cleaner read on the household wallet and brands’ performance. Several of last month’s calls have now been tested. The Lululemon China miss, which we flagged in our data update series, was confirmed in early September; LV’s slide after the Molly Tea verdict deepened rather than faded.

With BigOne Lab’s proprietary offline payment data as of August 2026, we cover:

• Luxury goods: Qixi festival (Chinese Valentine’s Day) falls in September. We check whether LV’s reputational hit is fading two months after the Molly Tea lawsuit, and how other luxury brands performed during the holiday season. We also track how high-net-worth spending shifts as Chinese equity has slumped since July, and whether resilient brands like Hermès are starting to feel the impact.

• Gold & jewelry: Laopu laps an unusually high base from last August, when shoppers rushed to buy ahead of a price hike. With gold prices rebounding, we revisit the performance of gold and high-end jewelry, and look at what secondhand prices say about Laopu’s brand premium.

• Tea & coffee: delivery platforms kept pulling back subsidies in August. We check whether the shift from delivery apps to the storefront held, and how brands funding their own in-store discounts (Luckin, Guming) compare with those that aren’t.

• Pop Mart: August is the high-base month we flagged last time. We look at whether the collab-heavy 2026 slate is delivering lasting lift, how long flagship IP series now stay hot, and what the new Twinkle Twinkle release tells us heading into September.

• Sportswear & footwear: ahead of Nike’s fiscal Q1 results on October 1, we look at the final month of its quarter and whether its inventory clearance is spilling over to peers’ pricing, online versus in stores. We also check Lululemon’s first month of fiscal Q3 after its China miss, and which brands are still finding growth.

At BigOne Lab, we curate data highlights, analyze them, and deliver insights trusted by 100+ top institutional and corporate clients worldwide.

🔒 The following content is available to Baiguan Pro subscribers.

1. Luxury brands

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Interested readers can view the full itinerary and sign up here:

When an economy slows, a specific investment strategy emerges: focus on what is still being built and identify sectors backed by genuine demand and order over the next few years.

In China right now, the reality check is straightforward. Property is still finding the bottom. Consumer stimulus is real but small. Local government balance sheets are in repair mode. In our last monthly view of Chinese equities, we noted that, given the macro, we approach Chinese equities less as a broad market allocation and more as a targeted bet on a handful of resilient sectors.

In today’s issue, we explore one such example: the power grid. Unlike many other policy-driven themes that quickly became speculative trades, this one comes with greater certainty: target numbers in the 15th Five-Year Plan, a national commitment to grid infrastructure buildout, and transparent bidding data you can check every month.

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The context: what’s in the 15th Five-Year Plan

On 15 January 2026, State Grid Corporation of China announced that fixed-asset investment over the 15th Five-Year Plan (2026–2030) would reach RMB 4 trillion, up roughly 40% from the 14th FYP — about RMB 800bn a year. China Southern Power Grid followed with RMB 180bn for 2026 alone and roughly RMB 1tn over the plan period. Together, the two biggest utilities point to close to RMB 5 trillion, compared with RMB 2.85tn actually spent in the 14th FYP and RMB 2.64tn in the 13th.

Within that, State Grid has committed to commissioning 15 UHV DC projects, lifting inter-provincial transfer capacity by 35%, and supporting no less than 200GW of new renewable interconnection annually.

We think this is particularly important because historically, inclusion in China’s Five-Year Plan signifies a strategic direction that has been thoroughly vetted and backed by strong central consensus—especially when accompanied by explicit numeric targets. For investors, this provides crucial visibility: we know the power grid will benefit from guaranteed orders and sustained capital expenditure across the supply chain for at least the next five years.

This is not fiscal spending committed by the central government. So it is legally required to be in anyone’s budget. Rather, the 4 trillion fixed asset investment is done through SOEs’ corporate capex, funded by “the enterprise’s own capital (100%) or finance-lease funds. (State Grid, for example, carries an AAA credit rating and generates sufficient cash flow to fund these commitments.)

That distinction matters in both directions. Because funding doesn’t rely on NPC approval, it remains insulated from national deficit constraints. But it is also governed by return-on-capital logic rather than political will — which, as we’ll see, means not every company across the supply chain offers the same structural growth opportunity.

Why State Grid wants to spend RMB 4 trillion

China regulates transmission and distribution the way most developed markets do, through a permitted revenue framework. Stripped to its essentials, the National Development and Reform Commission (NDRC)’s pricing rules — revised in late 2025 and effective for ten years from January 2026 — say this:

Permitted return = effective assets × permitted return rate

The return rate is set by the regulator. State Grid cannot move it. Which leaves exactly one lever for growing profit: make the asset base bigger. At a 5% permitted return, every additional trillion renminbi of invested assets is worth roughly RMB 50bn a year.

This is not a Chinese peculiarity — it’s why every rate-regulated utility on earth, America’s included, is currently announcing record capex. State Grid’s RMB 4 trillion is first and foremost a commercial decision. The policy alignment is real, but the incentive would exist without it.

The other half of the formula works in the opposite direction. Permitted cost is not a pass-through of whatever State Grid spends. The regulator sets ceilings on materials, repairs and other operating costs, and anything above the ceiling cannot be recovered in tariffs. Savings, meanwhile, are split evenly between the utility and its customers.

Put simply, spend above the ceiling, and State Grid absorbs all of it. Spend below, and it keeps half. The only way to improve that arithmetic is to pay less for what it buys.

So the rational strategy is to build as many projects as possible and pay as little as possible per unit of equipment. Volume is structurally supported. Price is structurally suppressed.

Two more misconceptions could lead to an overly optimistic view of the project’s scale.

Misconception 1: “It’s in the Five-Year Plan, so it will happen”

A Five-Year Plan target is an expectation, not a statutory obligation. State Grid’s RMB 4tn is a corporate announcement with multiple audiences — suppliers, bondholders, the regulator, the market.

The 14th FYP planned 24 AC and 14 DC UHV lines. It delivered a fraction of that. For investors, this mismatch creates a real risk: beneficiary companies often trade at elevated valuations on high expectations, leaving them vulnerable to sharp corrections when targets slip. For instance, when approvals for the “3 AC, 9 DC” package slipped in 2025, revenue growth at core suppliers like XD Electric and Pinggao decelerated starting in Q3 2025.

The correct adjustment is to treat “written into the plan” as moving probability from roughly 40% to roughly 70%. Not to 100%.

Misconception 2: “AI data centers are driving Chinese power demand”

This one is worth killing carefully, because it is doing a lot of work in the current narrative.

China’s H1 2026 electricity data, from the National Energy Administration:

Internet data services grew rapidly at 44%, but they only represent 0.97% of national consumption. At that base, even 44% growth contributes roughly 0.3–0.4 percentage points to a 5.3% headline.

The real load-bearing wall is the 65% of consumption in secondary industry—that is, manufacturing and export (as current strong exports are also largely supported by high-tech products driven by the global AIDC build-out and AI supercycle).

Over the 14th FYP, electricity consumption grew at a 6.6% CAGR against 5.4% GDP growth — an elasticity above 1.2, driven by electrification substituting for oil and coal in transport, heating and industrial process heat. That continues even if GDP slows, because it’s a substitution, not a function of growth.

The real worry is demand-side weakness. Residential consumption grew just 3.1% in H1. AIDC build-out won’t materially save it if demand keeps slowing.

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To sum it up so far: While China’s power grid expansion is a rare area of reliable structural growth—backed by explicit national targets and clear commercial alignment for major utilities like State Grid—the core operational incentive is to maximize equipment volume while squeezing pricing. As a result, benefits will not accrue equally across the supply chain.

Furthermore, with residential electricity consumption on a decelerating trend and AI Data Centers (AIDCs) unlikely to materially alter national power demand structure in the near term—despite all the capital market narrative and hype—slowing demand remains a very real risk.

We must be highly selective on sub-sectors.

What we are selecting for

Filter one: we want to look at segments where the buyer cannot squeeze or has relatively higher margins. State Grid is a monopsonist — one buyer facing hundreds of sellers — with a regulatory mandate that incentivizes cutting its procurement bill. In most of the supply chain it wins that fight easily. In 2025, a single batch of ordinary substation equipment produced 272 winning bidders; a 2024 batch split RMB 15.3bn across 579 lots among 283 companies, averaging RMB 26.7m per lot. That is not a market with pricing power.

One meaningful exception is ultra-high-voltage (UHV). In UHV main equipment, only three to five suppliers qualify. Across the first four UHV equipment tenders of 2026, thirteen brands took 87.2% of RMB 29.26bn.

Filter two: we want to look at segments whose growth is relatively insulated from electricity consumption growth. Most grid equipment demand depends on load. If consumption decelerates — and the residential numbers suggest it might — that demand decelerates with it.

But one category of spending is driven by something else entirely: the physical difficulty of absorbing renewable generation that has already been built. This demand depends on installed capacity, not consumption (at least for the next couple of years).

The absorption problem

At the end of 2025, China’s wind and solar capacity reached 1,842GW — overtaking thermal for the first time. Renewables hit 2,337GW, or 60.1% of total capacity. By mid-2026 wind and solar were around 1,950GW, over 48% of everything installed.

The grid cannot absorb it. The utilization rate of the solar and wind capacity has declined for the third consecutive year.

Provincially, it is worse: in Jan–Feb 2026, solar utilization ran at 60.8% in Tibet, 78.7% in Qinghai, 82.5% in Gansu and 85.6% in Xinjiang. These are sparsely populated regions characterized by amplified seasonality, where local markets cannot absorb the massive excess of renewable generation, nor can it be exported to high-demand load centers in eastern China.

Two things follow.

First, this is an economic problem with powerful owners. Each percentage point of curtailment costs a renewable project roughly 0.8–1.2 points of IRR. Several trillion renminbi of installed assets — owned by the Big Five gencos, local governments and their lending banks — are watching returns erode.

Second, the problem breaks down cleanly into two engineering questions, and the State Grid Energy Research Institute has quantified both. By 2030, roughly 80% of curtailment in State Grid’s territory will sit in the “Three Norths” (China’s wind- and solar-rich northern regions); within the year, 74% will fall in spring and autumn; within the day, 74% at midday.

• Spatial mismatch — generated in the northwest, consumed in the east. Addressed by transmission.

• Temporal mismatch — generated at noon, consumed at night. Addressed by storage.

That gives us our two themes: ultra-high voltage is where the supply chain retains pricing power. Storage and grid-forming are where demand is mandated. The rest of this piece works through each.

Note: Our objective is to establish a clear framework that tracks and expresses this trend, rather than relying on stock-picking to generate alpha. In other words, a company can stay on our list as long as its core operations align closely with the underlying thesis, even if the business is currently struggling or shows suboptimal financials.

Theme one: Ultra-high voltage

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• Xi heads to Washington. Xi Jinping is set for his first US state visit since 2015, capping his busiest travel stretch since 2019. Expectations for the Trump-Xi meeting itself are low — stabilization, not a reset — though a Chinese business delegation is plausible and worth watching for who is (and isn’t) on it.

• AI drama goes long-form, regulation follows. Mango TV has released what it calls China’s first full-length AI-generated drama, a 30-episode sequel made in five months instead of a year-plus.

• A labor dispute goes global. Auto-lighting supplier Xingyu rescinded roles for about 100 new graduates; when a domestic complaint stalled, the graduates took their case straight to Xingyu’s European automaker clients, triggering investigations at Volkswagen and Mercedes-Benz.

• Moonshot moves toward an IPO. Kimi-maker Moonshot is reportedly preparing a dual Shanghai/Hong Kong listing. Robert discusses how China’s frontier AI labs are unusually collaborative with each other because they see the competition as global, not domestic.

• Anthropic disclosure meets Moonshot dispute. A new Anthropic threat report details a China-based dating-app scam network built on Claude, landing alongside an unresolved dispute over Moonshot allegedly rerouting Kimi queries to Claude.

Xi’s State Visit to Washington

Low Stakes, High Symbolism

This has been Xi Jinping’s busiest travel stretch since 2019: stops in Kazakhstan and Egypt and at the BRICS summit in New Delhi, with a first state visit to Washington since 2015 still to come later this month. Robert Wu is skeptical that the Trump-Xi meeting itself will produce much: “the expectation is not very high.” He argues its main function is simply to keep principal-to-principal contact happening, not to reset the relationship. Unlike last year’s meeting in South Korea, which came amid an active trade dispute and drew intense speculation, this year’s meeting draws relatively little domestic Chinese attention — Wu says even policy circles are only lightly engaged, because China feels it has “found its own pace” in dealing with Washington. He does not rule out a narrow trade agreement or selective easing of controls, but cautions against reading Xi’s other stops as building toward the US visit; Chinese leaders typically bundle overseas trips together for logistical reasons rather than strategic sequencing, citing Xi’s 2013 stops in Mexico and Costa Rica ahead of a US visit as precedent.

Will Xi bring business leaders?

One open question is whether Xi will bring a delegation of Chinese executives, something he has mostly avoided since around 2020. Reuters and SCMP reporting suggests he might this time, and Wu thinks it plausible given that Trump’s own May visit to Beijing included Elon Musk, Tim Cook, and Jensen Huang. Nothing is confirmed. Wu specifically hopes to see China’s frontier AI founders included, though he calls this “very unlikely,” and flags that ByteDance founder Zhang Yiming was a conspicuous absence from the equivalent delegation during Trump’s Beijing visit despite ByteDance’s high stake in the relationship. Looming over the visit: Huawei’s criminal trial has just opened in New York, and Shenzhen hosts APEC in November — China’s largest hosting moment in over a decade.

“I think right now it’s just good that the leaders of two countries get to meet every now and then in person and have this principal-to-principal communication. This really can help stabilize the relationship.”

— Robert Wu

China’s First Full-Length AI Drama Lands

Appetite for more than micro

Mango TV has released what it calls China’s first full-length AI-generated drama: a 30-episode sequel to Journey to the West, produced in five months versus the year-plus a conventional production would take. Mango’s stock rose in the days after release. Olivia frames this against the prior episode’s discussion of Niu Lai, an unpolished, human-made viral film that succeeded partly because audiences craved something authentic — raising the question of whether audiences now want the opposite.

Robert doesn’t see AI and human content as being in conflict. He compares the current spread of AI-generated micro-dramas — now visible everywhere on China’s subways and in elevators — to the early mass-adoption phase of short video in China. He doesn’t think the government opposes the trend, reading it instead as an emerging industry Beijing is willing to let develop even as it disrupts incumbents: “many small-time actors and actresses lose a lot of their jobs” as some production sites lose work. His forecast is a split market: a large, cheap, always-available content tier that AI fully occupies, alongside formats built on the audience’s ability to physically meet or interact with real performers — concerts, tours, fan events — that AI cannot replace. He expects a middle category of AI-enhanced human performance to grow too, describing a friend’s account of a human-acted, choice-driven interactive drama filmed like a branching game, where the actors resisted being replaced by AI specifically because they wanted in-person contact with fans; he speculates AI could eventually make branching-script productions like this commercially viable by handling the otherwise unmanageable number of narrative paths.

Olivia connects this to a physical-world parallel: a reconstructed palace complex she visited in Ordos, Inner Mongolia (formerly nicknamed a “ghost city”), built at large expense purely as a filming location — the kind of capital investment that could increasingly be replaced by virtual, AI-generated sets, with data centers taking the place of studio backlots.

“There will be a mass market, really cheap, you-can-access-anytime type of content, and that will be completely occupied by AI. But then there’s also some work, some projects where humans are actively involved.”

— Robert Wu

A Labor Dispute at Xingyu Goes International

Don’t test these recent grads

Xingyu, one of China’s largest automotive lighting suppliers and a vendor to global automakers, hired roughly 400 new university graduates and then reportedly moved to terminate about 100 of them — offering the option to resign voluntarily or accept lower-paid assembly-line roles. A domestic complaint to China’s labor bureau reportedly went nowhere, so the affected graduates took their case directly to Xingyu’s European clients. Volkswagen Group China has opened a special investigation; Mercedes-Benz has confirmed it referred the matter to a specialist team. Xingyu has apologized, suspended its HR director, and offered a compensation package including a job-search subsidy and accommodation support. The company is already listed on the Shanghai Stock Exchange and is reportedly planning to add a Hong Kong listing.

Robert calls the underlying dynamic simply sad: trust between Chinese employers and employees is low right now, and he says it runs in both directions — he separately describes a friend, also a founder, whose signed offers to two strong candidates were declined at the last minute, partially because the candidates didn’t trust the company to honor them. He’s unambiguous that Xingyu’s conduct was wrong (“clearly not ethical, not a professional thing to do”), but he’s struck by how effectively the affected graduates organized: escalating to the company’s biggest overseas clients was, in his words, “really smart,” and the incident became national news specifically because of how well-organized the response was.

The bigger pattern, per Robert, is that Chinese companies now selling into global supply chains carry global reputational exposure that most of them have not internalized.

“You can see that young people today are very innovative and creative in how they seek their own rights. Like this going-to-the-EU thing — it’s really smart, I have to admit.”

— Robert Wu

Moonshot’s IPO and a Rare Truce Among China’s AI Labs

Competition looks different these days

Moonshot AI, maker of the Kimi model family, is reportedly preparing a dual Shanghai and Hong Kong listing. The episode cites Moonshot running at roughly $1 billion in annualized revenue currently, targeting a $2 billion annualized run rate by year-end (figures as stated in the episode, not independently verified here) — still small next to the revenue levels reported by OpenAI and Anthropic, but Moonshot’s pitch, per Olivia, is growth and the durability of Kimi K3 as a commercial platform. Robert reads the implied valuation as roughly in line with China’s other already-listed frontier model companies, Zhipu and MiniMax, which he says now function as a market benchmark for what a Chinese frontier lab is worth, at “only a fraction” of US peers’ valuations. He notes one of those peers announced a large secondary fundraise just last week even with its share price underperforming — in his reading, every Chinese lab is racing to build a capital war chest now, in case “the AI bubble bursts in a few months or a few years.”

Asked to compare competitive intensity with the US, where Robert calls the frontier-lab rivalry “almost petty,” he makes an unexpected argument: China’s AI labs are, if anything, less rivalrous with one another than in previous domestic “tech wars” (food delivery, bike-sharing, and earlier super-app rivalries such as Alibaba and Tencent blocking each other’s links). His explanation is that AI is the first Chinese tech sector born global rather than domestic, so Chinese labs see Anthropic and OpenAI as the competition, not each other. He describes talent and even informal support flowing between Chinese labs and their founders’ former employers in a way that would have been unthinkable during the super-app era, crediting this partly to the founders’ generation (millennials and Gen Z, globally oriented from day one) and partly to the industry’s global-facing origin.

On Moonshot’s business model, Robert points to a licensing arrangement attached to its open-weight releases: large commercial users monetizing above a certain threshold are asked to pay Moonshot a licensing fee, and he believes compliance is improving because bigger companies increasingly care about their reputation among researchers and peers. Some cloud providers reportedly want to support the arrangement directly because stronger underlying models improve their own businesses — in his framing, an ecosystem-building logic rather than a purely transactional one.

“This is probably the first ever industry in China where, when it was first born, it’s a global competition.”

— Robert Wu

Anthropic’s Scam Report

Time to get off the apps

Anthropic’s newest threat-intelligence report includes a case the hosts single out: a China-based app studio accused of using Claude to build and operate more than 20 dating apps, all marketed as staffed entirely by real people. The report describes nearly 5,000 distinct AI personas that messaged roughly 25,000 real users over a two-week window in April, with real gig workers mixed in at roughly a 3-to-1 AI-to-human ratio to cover tasks the AI could not yet handle convincingly, such as live video calls used to pass authenticity checks. Anthropic says it banned the associated accounts and worked with other AI labs to shut the network down. These figures are as reported in Anthropic’s own disclosure; the hosts do not independently verify them.

Robert connects this to China’s broader, worsening scam landscape, illustrating the government’s aggressive countermeasures with a personal anecdote: two of his personal investors, who are neighbors, had their bank accounts automatically frozen for several hours after each sent him a similar amount of money the same day — an anti-scam algorithm flag he had to spend time getting unwound. He argues telecom and romance scams (China’s “pig butchering” schemes) are especially hard to stop because they exploit psychology rather than force, and because the more sophisticated operations are cross-border — he cites the earlier Myanmar scam-compound cases as the precedent that first forced international enforcement cooperation. He doesn’t expect the trend to fade and thinks user education, not enforcement alone, is the realistic response, since scam operations can now be produced at a scale no police force can individually chase down.

On Anthropic itself, Robert is candid about being conflicted: disclosing client usage behavior is something he feels Anthropic “maybe shouldn’t disclose,” even though making a genuine scam network public plausibly serves the public good. He links this report to a separate, earlier Anthropic accusation that Moonshot secretly routed some Kimi user queries to Claude and presented Claude’s answers as if Kimi had generated them — by Anthropic’s own count, a large number of chats, though nothing close to Kimi’s total user base. Robert’s read is that this is not equivalent to stealing a rival’s underlying model or algorithm — “you can only send the questions and get the answers” — and is better understood as a shortcut to save on data costs than outright theft. But he thinks Moonshot should have anticipated the exposure and reputational cost: “they should have known that Anthropic would use this as a means of attack.” Given the timing — Anthropic’s scam disclosure and its routing accusation both landing as Moonshot pursues its IPO — Robert suspects deliberate strategy on Anthropic’s part, describing what he sees as a form of commercial warfare. He separately mentions an unconfirmed claim circulating that someone possibly linked to the PLA uploaded sensitive material into Kimi without realizing it could be rerouted to Claude — he is explicit that he does not know the details and cannot confirm this account, so it should be read as unverified.

“It does feel to me that this is very strategic. That there is some fierce commercial warfare.”

— Robert Wu

Last call: Apply for the Autumn 2026 Baiguan China Tour before this Sunday (Sep 13) to claim early-bird discounts.

Check out the last remaining available trips here.

Recently, we have invited several industry experts to talk about robotics, new energy, and supply chains in China. Today, we have invited another real industry heavyweight, who goes by “Dr. Joe,” to talk about one of the most strategically important industries of today: semiconductors.

Dr. Joe was an early co-founder of perhaps the most consequential semiconductor foundry business in China, and is still actively involved in the industry.

In this conversation, Dr. Joe will share an insider account of exactly how far China’s semiconductor industry still lags behind the Western world and what a self-sufficient Chinese semiconductor industry would mean for the rest of the world.

Baiguan: Most discussions of China’s semiconductor industry begin from the premise that its foundries still lag behind TSMC. But people disagree about the size and cause of that gap. Is the main constraint capital, talent, equipment, process know-how, or simply the time required to accumulate experience?

Dr. Joe: There is no simple answer because there are many kinds of semiconductor products. When people speak of “the gap,” they are usually referring to leading-edge CMOS technology, particularly at the five-nanometer and three-nanometer nodes. In that specific area, the single biggest and perhaps the only constraint is access to EUV lithography equipment, which is not available in China.

But most semiconductor products do not require EUV. In those areas, China is moving very quickly, and in some cases it is already leading. CMOS image sensors are one example. The major global suppliers include Sony, Samsung, and OmniVision, while Chinese companies have also become highly competitive in specialized applications. In areas such as security cameras and satellite imaging, some Chinese CIS products are already among the best in the world.

The picture is therefore very different from the common perception that China is behind across the board. In many specialized segments, the gap has already reversed. China’s semiconductor exports have also reached record levels over the past three years. The real lag is concentrated in leading-edge CMOS manufacturing, not in the semiconductor industry as a whole.

Baiguan: So your argument is that, wherever EUV is not essential, China is either already competitive or likely to become competitive relatively soon. The remaining gap is concentrated at the most advanced logic nodes.

Dr. Joe: That is correct. The clearest limitation today is advanced CMOS at five nanometers, three nanometers, and beyond. Even there, however, alternative architectures are becoming more important. Huawei’s Tau Scaling Law, 3D integration, and heterogeneous integration are all attempts to improve system performance without relying exclusively on conventional transistor scaling.

In the near term, these approaches can produce chips with performance comparable to products made with more advanced process nodes. They do not mean that EUV will never be needed. But they can reduce the importance of EUV for a period of time and create other routes to comparable system-level performance.

Baiguan: When you say China will eventually need EUV, how far away is “eventually”?

Dr. Joe: My prediction is that within five years, and possibly sooner, China will have an EUV solution or an alternative technology that serves the same purpose.

Baiguan: That’s a strong statement.

Dr. Joe: It is important to remember that the current ASML architecture is not the only possible way to generate EUV light. Elon Musk has recently signaled interest in free-electron laser, or FEL, technology for the proposed Terafab in Texas. This would still use EUV wavelengths, but the source architecture would be different. Instead of pairing an individual light source with every lithography machine, a very large accelerator-based or synchrotron-like source could potentially serve an entire fab, or even several fabs.

Both China and the United States are exploring this general direction. There is no law of nature that says advanced lithography must follow ASML’s present technical path. ASML’s system is the result of decades of successful engineering and iteration, but other engineering solutions are possible. ASML itself is a Dutch company, not an American or Chinese one, which is another reminder that this remains a global technological competition. That is why I am optimistic that EUV will become less of an absolute bottleneck within five years.

Baiguan: In other words, public debate may be too fixated on one company and one present-day architecture.

Dr. Joe: Exactly. Technology is not static. The semiconductor industry works with roadmaps that extend five to ten years into the future, and there are usually several proposed solutions to each major technical problem. The market ultimately decides which approach wins. Outsiders often take the most impressive technology of the present moment and assume it will remain the only viable path indefinitely. That is rarely how this industry develops.

AI chips, the memory wall, and 3D integration

Baiguan: Is this progress in alternative chip architectures one reason Chinese AI models such as Kimi, GLM, and DeepSeek have advanced so quickly?

Dr. Joe: That is a separate issue.

An AI model is primarily an achievement in algorithms and software. Hardware is another part of the system. Both the United States and China combine computing infrastructure with model development, but they do not necessarily have the same balance between the two.

If access to the strongest chips is limited, developers can compensate by simplifying models and reducing the amount of computing power required. That is part of what Chinese model developers have been doing, up until now.

If more advanced 3D and heterogeneous-integration chips become available, however, they will give those developers a stronger hardware platform and allow them to build more capable models.

Baiguan: So the potential of these alternative hardware technologies has not yet been fully reflected in the performance of Chinese AI systems?

Dr. Joe: Not yet. I expect the first important results to appear next year. I am directly involved in the development of a chip based on 3D integration, so I have been following this very closely.

NVIDIA’s GPUs are extremely powerful, and the memory capacity around them is very large. But the movement of data between memory and the processor remains constrained by what the industry calls the “memory wall.” A GPU may spend a large share of its time waiting for data rather than performing calculations. My own estimate is that this waiting time can reach roughly 70 percent in some workloads.

If 3D integration substantially shortens those data paths, much more of the GPU’s theoretical computing capacity can be utilized. In my view, a well-designed system based on this approach could match or exceed the performance of NVIDIA’s highest-end chips, even if the underlying logic is not manufactured on the world’s most advanced process node.

Baiguan: Jensen Huang has made the point that the rest of the industry is not standing still either. TSMC and other leading companies are also investing heavily in advanced packaging and 3D integration. Does China really have an advantage here, or is everyone moving in the same direction?

Dr. Joe: Everyone is moving. The question is not whether other companies are progressing, but who is ahead in a particular architecture and who controls the relevant intellectual property.

For instance, today’s HBM systems are generally based on 2.5D integration and chip-to-chip connections. The next step is wafer-scale 3D integration using wafer-to-wafer bonding. That is a more advanced form of integration. I believe the industry will need wafer-to-wafer technology by the HBM5 generation.

There is at least one Chinese company with important intellectual property in wafer-to-wafer stacking. I do not want to name the company here, but it is an example of a field in which a Chinese company may be ahead rather than behind. If the rest of the industry eventually adopts the same route, major international memory companies may need access to Chinese intellectual property.

Same thing is actually happening in memory. Historically, DRAM cell area moved from roughly 12F² to 9F² and then to 6F². The next generation is 4F², which is close to the theoretical lower limit for a conventional DRAM cell. Samsung, SK hynix, Micron, CXMT, and other companies are all working on this.

One company in China announced a 4F² product in 2024 and began delivering products in 2025. Samsung, by comparison, is targeting production around 2028. If that timetable holds, the Chinese company will be two or three years ahead. Combine 4F² cells with wafer-to-wafer integration, and China could become a leader in some next-generation DRAM technologies without first solving every problem in EUV lithography.

Baiguan: It doesn’t seem this type of information gets reflected in today’s market consensus at all.

Dr. Joe: Indeed. But engineers who attend the relevant technical conferences can see these developments, but many people in finance and the broader public still use an older picture of the industry. I expect that picture to change substantially over the next two years.

Baiguan: How much does China’s wider manufacturing ecosystem contribute to this progress?

Dr. Joe: China is already the world’s largest manufacturing center, and semiconductors are the most technologically advanced extension of that base. Different provinces have their own semiconductor programs, while the national Fifteenth Five-Year Plan identifies three especially important four-character concepts: 存算一体computing in memory, 三维堆叠3D integration, and 光电融合optoelectronic integration.

These are not uniquely Chinese ideas. The entire industry is moving in these directions. What matters is that they have been elevated into a national technology strategy, and Chinese companies are moving quickly in all three.

Computing in memory and 3D integration are intended to address the memory wall. HBM is extremely important today, but technically it is an awkward and transitional solution. The industry needs a more direct way to place memory and computing together. I expect samples based on a new approach next year and volume production the year after that.

Samsung, SK hynix, and Micron are also pursuing these technologies. My point is not that they will stop innovating, but that one Chinese company is currently ahead in a particular implementation. The same kind of intellectual-property dynamic has already appeared around YMTC’s Xtacking NAND architecture. In the future, some global leaders may need to license or otherwise work with technology developed in China.

Baiguan: Does the same optimism apply to semiconductor materials, including photoresists and silicon wafers?

Dr. Joe: Japan remains the leader in many semiconductor materials, and this is still an area of Chinese dependence. But there are now a very large number of Chinese companies conducting materials research. I expect another fundamental change within several years.

My broader prediction is that around 2032, the overall picture will flip. That is only six years away. In some categories China will still be catching up, but in others the direction of the gap will reverse.

In the paid sections below, Dr. Joe will continue to answer questions on:

• How global talent flows have shaped and will shape the semiconductor industry

• Why Dr. Joe returned to China

• The triumphs and mistakes of SMIC, China’s largest domestic foundry

• What a self-sufficient Chinese semiconductor supply chain would mean for the rest of the world.

• Will China bring “over-capacity” for semiconductors as well?

Read more

The catalyst was 《后西游记》(”Journey to the West: After”)— a 30-episode, 40-minutes-per-episode mythological series that aired August 31, 2026, simultaneously on Mango TV and Hunan Satellite TV’s prime-time slot. There are no human actors, no film crew, no on-location shoots; every character, set, and frame is generated by AIGC. Per the production team, the cost came in at roughly one-tenth of a traditional drama of comparable length [*].

Hunan TV—commonly nicknamed “the Mango TV” because its logo resembles a mango—holds a very special place in the childhood memories of Chinese people born in the ‘80s and ‘90s. It has always been a pioneer, introducing reality television, variety entertainment, and talent competitions while most traditional Chinese networks stuck to old-fashioned programming. And now, it is placing a new bet: AI-generated dramas.

Subscribe now

Seedance, and a regulatory green light

The show was built on ByteDance’s Seedance 2.0 / 2.5 models, delivered through Mango TV’s in-house AIGC Innovation Content Center [*]. That alone is a notable vote of confidence in a domestic video model from a tier-one broadcaster.

But the more interesting unlock is regulatory. The show is the first project to run under the National Radio and Television Administration’s “边审边播” (review-while-broadcasting) mechanism, rolled out under the NRTA’s so-called the “21 Articles” [*].

Issued in August 2025, the 21 Articles are the clearest signal yet of Beijing’s shifting posture on audiovisual content:

• The 40-episode cap on TV dramas is gone.

• Overseas IP adaptation is explicitly encouraged.

• “Review-while-broadcasting” is piloted — but only for series, seasonal, anthology, and sitcom formats (the structurally modular kinds that don’t need a fixed ending locked before air).

In other words, the regulator is simultaneously loosening format restrictions and embedding AI-native production into the compliant mainstream. For a year that I earlier called 2026: Year One of China’s AI Film Industry, this is the moment the establishment stopped treating AI video as a fringe experiment.

While people debated “does it look real,” China started getting paid

AI animation is among the first categories to reliably generate cash flow. Prior to Mango TV airing the show, Chinese netizens were already watching AI shorts online. For instance, ‘AI anime drama 漫剧’—anime series created purely by AI—has become the addictive phenomenon known as ‘mealtime shows’ due to its ability to pack addictive hooks and memes into short episodes

While the discourse is still stuck at “but does the AI hand look right?” or “can AI writing really replace a human?”, in China, AI video has quietly become a cash-flow business. As I wrote back in my AI film industry piece, we’ve moved well past the “toy project” phase. The monetization isn’t theoretical anymore — it’s showing up in platform payouts, in recharge numbers, and in overseas app-store receipts.

The most important mental model: AI video models are engineered to spike dopamine, not to be philosophically profound. A vertical short-drama viewer is on a subway scroll looking for a 20-second emotional hit — the slap, the reveal, the underdog comeback. They don’t care if the glass-physics is slightly off. It’s the visual equivalent of junk food: cheap to make, irresistible to watch, but highly profitable.

Let me show you the receipts.

Where the money actually is: three working models

1) AI 漫剧 (AI “anime dramas”)

AI anime-dramas are the sleeper hit of 2026. Production is startlingly cheap: a 3D AI anime runs about ¥2,000–2,500 per minute versus six figures for traditional animation [*]. Platforms have built explicit monetization rails — Douyin, 红果 (Hongguo, micro drama platform owned by Bytedance), and Tencent’s 火龙漫剧 (Huolong) have launched dedicated anime revenue-share plans.

Per-episode payouts can reach thousands of yuan for shows crossing 10 million views [*]. Some verified accounts report personal AI-content incomes above ¥200,000/month without selling courses — purely from platform share and novel affiliates [*].

2) AI live-action short dramas — already topping the charts.

Since the start of 2026, multiple AI live-action short dramas have become breakout hits: 《斩仙台 AI 真人版》 (Zhan Xian Tai AI Live-Action) crossed 100 million views in six days; 《嫡女泣血》 (The Legitimate Daughter Weeps Blood) surpassed 230 million views to top industry charts [*].

Period-costume and Chinese fantasy-adventure are already very popular formats of micro-dramas in China and have become the “guilty pleasure” of many. Even before the emergence of AI, an entire “assembly line” already existed for producing these fast-paced, addictive series. They bypass A-list stars, instead licensing novel scripts from the internet and sign internet influencers or lesser-known actors. Now, AI has simply driven production costs—which were already squeezed—down to rock bottom.

3) The “B2B” model: “legitimate” film and TV integration.

Early this year, the acclaimed Chinese director Jia Zhangke released an AI film built on Seedance 2.0, starring an AI version of himself — a signal moment of a top-tier professional embracing the stack [*]. Similarly this year, Kuaishou’s Kling was integrated into the popular historical drama 《太平年》 (Swords Into Plowshares), where AI-assisted storm-and-naval-war sequences improved efficiency 8–10x while holding cinematic quality [*].

That’s what I call the “B2B” model: sell the model and workflow into professional pipelines, not just to consumers.

The micro drama export: almost every AI short drama abroad is Chinese

If you’ve been watching the overseas short-drama charts, you’ve probably noticed something: the AI video short plays flooding foreign app stores are almost entirely made by Chinese companies. This is the direct sequel to the Chinese-made short-drama boom abroad I covered when ReelShort first topped the US App Store — except now the marginal cost of a new title has fallen off a cliff.

According to Sensor Tower’s Q1 2026 statistics, out of the $750 million global in-app purchase (IAP) market for that quarter, DramaBox (Dianzhong Technology) and ReelShort (Crazy Maple Studio) each generated nearly $140 million in IAP revenue, tying as global dual oligopolies. Together, these two China-backed leaders captured nearly 37% of total direct consumer spending worldwide for the quarter.

It is, in a sense, the video equivalent of the “token export” wave I wrote about earlier: Chinese AI capability leaving the country as finished, monetizable product.

Investment implications

Read more

Don’t miss out — claim your early-bird discount and secure your spot now.

Still open for registration

Weekday Industry Tracks

• Robotics & AI Executive Tour in collab with Caixin Data, Beijing, Oct19-23 (5days)

• Advanced Manufacturing, Foshan/Shenzhen, Oct 26-30 (4.5 days)

Weekend Immersion Tracks

• Datong: where China became China, Oct 24-25

For pricing and discounts, click here.

If you are unable to join us on this autumn series of tours, feel free to email Baiguan_ChinaTour@bigonelab.com with your interests. We also offer bespoke study tours and board retreat services tailored to your needs.

Learn more about the tours and tour leaders

• How would Chinese technology look like five years from now?

WHY BAIGUAN CHINA TOUR

Click here to read a Q&A of regularly asked questions

Navigating China’s complex economic landscape requires more than just a standard itinerary. The Baiguan China Tour is designed to deliver three core pillars of value:

• Deep-Diving Engagement, with Curation: We move beyond surface-level observations into the engine rooms of industry. Through structured dialogues with C-suite executives curated by Baiguan and our sector specialist partners, and through on-the-ground audits of companies, smart factories, AI labs, and supply chain hubs, we unpack the operational realities and technological breakthroughs that underpin China’s new economic trajectory.

• Unfiltered Access and Crucial Context: We strip away the corporate PR and political spin to reveal the ground truth. Of course, the relationships and senior access matter. But a company visit on its own is only one data point. Every company has a story it wants visitors to hear. Our job is to explain how that story fits into the broader industry, what the company did not say, where its incentives lie, and which claims deserve more skepticism.

• High-Quality Community: You won’t be touring with tourists. Our groups are intentionally kept small and selective, comprising global investors, entrepreneurs, multinational executives, and scions of business dynasties. This ensures a high-trust, peer-to-peer learning environment where insights are enriched by diverse perspectives, forging lasting connections with like-minded global leaders.

Some of the past participants of the Baiguan China Tour include:

• Founder of one of Germany’s most successful technology companies

• Head of corporate venture capital at a major US industrial company

• Singapore-based Chief Investment Officer at a large family office

• American investing family rooted in China and early backer of Alibaba

• Research Analyst at a top Europe-based hedge fund

• Former Senior Researcher at a leading high-frequency trading house

• Member of a prominent Latin American business family and entrepreneur

• Former board director of the Hong Kong Stock Exchange

• Silicon Valley venture investor in the fintech field

• Influential Thai family member with years of experience across VC, PE, and investment banking in Southeast Asia

• Malaysian Founder of a multi-billion Asia-based investment fund

• Senior Engineer at a major US Mag7 company

• Former APAC Payments Analytics Lead at a major global payment company

• Singapore-based private Investor with years of experience and ongoing interest in China’s capital markets

• Business Consultant to Fortune 500 company

• Researcher at an Australia-based long-only investment fund

Disclaimer

Weekday Industry Tracks

🤖 Robotics & AI Executive Tour | Oct 19-23 | Beijing

Curated by Baiguan and Caixin Data, this tour cuts through the noise to take you deep into the industrial value chain—from mass-production lines for core hardware and R&D hubs for foundational models to the frontlines of national standard-setting and advanced application testing. Rather than assessing technologies in isolation, we help you decode the underlying infrastructure and economic logic driving this transformation, equipping you with the hard-edged judgment needed to distinguish where capital is truly flowing from where the headlines merely suggest.

A key highlight of this tour that you won’t easily find anywhere else is that, leveraging Caixin’s deep network, tour participants can have closed-door meetings with C-level executives and founding team members of AI and robotics enterprises, including Moonshot (Kimi) and Zhipu AI (GLM). Beyond AI and robotics, participants can also enjoy a rare glimpse into China’s commercial space industry.

⚙️ Advanced Manufacturing & Supply Chain Tour | Oct 26-30 | Foshan → Shenzhen

This journey reveals Chinese manufacturing not as a static cost center, but a dynamic engine of reinvention. From Foshan’s industrial titans to Shenzhen’s deep-tech disruptors, we trace how legacy giants and frontier startups share the same supply chain soil—driving the national “New Quality Productivity” agenda across smart home appliances, biotech, humanoid robots, and AI. This is not a site visit to assembly lines; it is an investigation into the strategy that allows China to scale from home appliances to humanoid robots with unmatched speed.

This tour is uniquely curated by Family Office Insight, the same partner in our very first, and highly successful Baiguan China Tour last year.

Weekend Immersion Tracks

🚄 A Weekend in Datong: Where China Became China | Oct. 24-25 | Datong, Shanxi

Datong isn’t on most itineraries. That’s the point. In the 5th century, Datong was the capital of the Northern Wei — a dynasty founded by the Xianbei, a non-Han nomadic group from China’s northern frontier, who chose to assimilate into Chinese civilization rather than rule over it as outsiders. That choice, and the century of upheaval and reinvention it triggered, is carved directly into the cliffs at Yungang Grottoes.

But history is never just history here; it is an economic lifeline. Beneath the ancient cliffs runs a second, more urgent story: Datong itself. Once a coal powerhouse that hit an economic wall, the city gambled its survival on a controversial bet—tearing down the new to rebuild the old. Today, that gamble is being stress-tested by a surge in domestic “heritage tourism,” accelerated by a surprise catalyst: a hit video game, Black Myth: Wukong. We won’t just admire the temples; we will sit with the tension between preservation and progress, examining how a controversial mayor’s vision is playing out on the ground.

Datong is a miniature of the Chinese model: resilient, contradictory, and constantly rewriting its future by reclaiming its past. It is a perspective no boardroom or briefing deck can replicate.

This tour is led by Steven Xiao, who would be no stranger to the participants of our second tour. Steven was born and raised in Beijing, and somewhere along the way to a decade-plus career in finance across New York and Shanghai, picked up a second, far more consuming interest: the Buddhist art carved into cliffsides and caves centuries before anyone thought to build a spreadsheet. He holds a B.S. in Industrial Engineering from Columbia University, which he has never once used to explain any of this. History and Buddhist art are his real vocation, pursued not from an armchair but from the caves themselves, tracing early Buddhist civilization across the furthest reaches of the Silk Road. This October, he trades the boardroom for a cliffside in Datong, leading the tour’s extension there.

Pricing and Important Details

To maintain the quality of dialogue and ensure meaningful interactions among investors and industry leaders, participation is by application only (you may fill in the application form here), with each tour limited to 20 seats.

Pricing & Discounts

Each tour offers three pricing tiers:

• Standard Rate

• Early Bird Discount: 10% off-Valid through 11:59 PM Beijing Time on September 13, 2026

• Returnee Discount: 20% off-Available for previous Baiguan tour participants

Discount Policies:

• Early Bird and Returnee discounts are non-combinable. Both are calculated on the Standard Rate; in cases of dual eligibility, the lower of the two rates applies automatically.

• Multi-Tour Savings: Register for two or more tours to save even more. This deduction applies to your post-Early Bird or post-Returnee total:

  • Total < $10,000 USD → Deduct $500 USD

  • Total $10,000–$20,000 USD → Deduct $1,000 USD

  • Total $20,000–$30,000 USD → Deduct $2,000 USD

  • Total $30,000–$40,000 USD → Deduct $3,000 USD

  • Total >$40,000 USD → Deduct $4,000 USD

Illustrative Example:

Scenario: You are a Returnee registering for two tours during the Early Bird window.

1. Base Discount: Two tours at standard rate (2,500 +15000 = $17,500). We apply your 20% Returnee discount: $17,500* ( 1 - 20% ) = $14,000

2. Multi-Tour Credit: Your adjusted total qualifies for a $1,000 deduction.

Final Fee: $14,000 - $1000 = $13,000

What’s Included:

• Five-star Hotels (eg., Sheraton, Westin, InterContinental) or character-filled equivalent stays on weekend immersion to enhance the local experience (if you select the accommodation-inclusive package)

• Travel insurance

• All scheduled company visits and seminars

• All breakfast, lunch and some dinners

• All ground transportation during the tour

What’s Not Included:

• International/domestic flights to/from the destination city

• Chinese visa application fees

• Personal expenses

• Certain dinners are not included in the standard program and will be clearly marked in the final detailed itinerary.

Applications, Refunds & Cancellations

• Cancel ≥30 days prior to the tour start date: Full Refund

• Cancel between 15~30 days (inclusive of Day 15) before the tour start date: 50% Refund

• Cancel <15 days before the start date (any reason, including visa issues): No Refund

• All time references shall be based on China Standard Time (Beijing Time, GMT+8)

• Requests must be sent in writing to Baiguan_ChinaTour@bigonelab.com

• Refunds will be processed minus a non-refundable administrative/service fee, the exact amount of which is subject to the applicable payment platform’s charges.

To apply, please click or scan to fill out this form: Baiguan China Tour Application Form - Autumn 2026

What to expect next:

• Upon reviewing your application, we will notify you of the outcome within 3 business days. If accepted, we will contact you to arrange payment and discuss next steps.

• We understand that emails can sometimes end up in your spam folder. If you don’t hear from us within 3 business days, please check your spam folder.

• Once your payment is processed, your seat will be officially secured. We will follow up with an email to gather additional details to enhance your experience, such as arrival information, dietary restrictions, or any special accommodation needs.

• About one week before the program begins, we will reach out with the exact daily schedules, meeting spots, and an introductory brochure about the companies we will be visiting. We will also create a designated WeChat group for participants and invite you to join.