The court ordered Molly Tea to pay RMB 10.3 million ($1.5 million), stop using the motif, and publish remediation statements across six platforms. Molly Tea’s founder, Zhang Bocheng, appealed. Overnight, the brand swapped its black logo for a colored variant.

Legally, the case was clean. LV’s quatrefoil marks were registered in China as early as the 1980s. Molly Tea had actually tried to register its own four-petal flower mark in 2024 — and was rejected by China’s IP office. The brand rolled out the design anyway. The court found willful infringement.

LV won.

However, within 48 hours, a Weibo hashtag started trending: “LV你身后空无一人” — “LV, there is no one standing behind you.”

Very few Chinese netizens came to LV’s defense. Scroll through the comments, and you’d struggle to find a single netizen backing LV’s position.

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Why nobody sided with Louis Vuitton?

Many Chinese netizens claimed that LV was effectively culturally appropriating traditional Chinese motifs.

The quatrefoil pattern has always been a cultural symbol in Chinese history. The pattern’s closest East Asian ancestor is the Baoxiang Flower (宝相花), a symmetrical four-petal motif that appears throughout Tang Dynasty art — Dunhuang murals, silk textiles, bronze mirrors, and was later adopted by the Japanese through Tang diplomatic missions.

An even earlier version: the persimmon-calyx pattern (柿蒂纹) from the Han Dynasty, pointing to the four cardinal directions and carrying the auspicious homophone shi (事, “things going as one wishes”).、

In many Chinese netizens’ eyes, the absurdity of the trademark lawsuit was brutal in its simplicity: LV was suing a Chinese brand for using an ancestral Chinese pattern

And then netizens went further. They dug up LV’s track record in other jurisdictions. In Japan, courts ruled against LV on similar motif disputes in 2021 [*]. The EU canceled LV’s checkerboard trademark for being too generic [*]. But in China, LV walked away with a ten-million-yuan verdict.

The “toilet bag”

Other consumers simply dismissed the originality of LV’s logo as being too generic.

For instance, many netizens pointed out that the quatrefoil pattern is actually ubiquitous in traditional yuanlin (garden) architecture across southern China—and that it is ultimately just a generic motif drawn from nature.

Some netizens even posted pictures of ventilation grilles on old toilets in mainland China, which are commonly carved with four-petaled, symmetrical flowers nearly identical to the LV quatrefoil. More pictures quickly followed: vintage courtyard walls, village window vents, 1980s floor tiles, and kitchen backsplashes, until users across Xiaohongshu, Weibo, and Douyin mockingly began referring to LV tote bags as “toilet tile bags.”

Side-by-side comparisons of LV totes and restroom walls rapidly became a viral meme on Chinese social media:

Many netizens admitted they only realized the visual similarity between Molly Tea’s logo and LV’s pattern after the lawsuit went viral on the internet.

Legal wins are not PR wins. Despite winning the case, this is certainly not a good move for LV.

In my observation, Chinese consumers tend to have a short memory when it comes to standard copyright disputes, so the immediate impact on sales rarely lasts. However, LV’s signature logo—which has long served as social currency for status and a fashion icon in China—is now associated with the “toilet.” That synthetic association poses a far longer-term threat.

This is not the first time

This misstep was certainly not the first, nor was it simply a matter of Chinese consumers boycotting foreign culture.

Many other brands have stumbled across China’s cultural landscape before. The most recent example was Lululemon’s yoga festival on the Great Wall, where the brand featured a Japanese Taiko drum performance while branding it as a traditional Chinese drum display.

Prior to this, other PR crises had emerged as well. In 2024, Fendi attributed a handbag knot resembling a traditional Chinese knot to “Korean craftsmanship.” In 2022, Dior marketed a $3,800 skirt as a “hallmark Dior silhouette,” even though structurally it was a Chinese Mamianqun (马面裙) dating back to the Ming Dynasty.

Of course, this is not to say that the criticism over copyright and design originality is limited to foreign brands—domestic chains like Chagee, for instance, have been repeatedly criticized by netizens for copying Dior’s signature aesthetic.

What set the LV backlash apart was not the dispute over logo design originality: the misstep happened at a time when the rising Guochao (国潮) trend has fostered a highly discerning consumer base—one that is developing a genuine, intellectual interest in reclaiming its cultural roots rather than simply paying for a superficial “vibe” manufactured by global brands.

Some Chinese netizens even discussed on Red Note about turning to Gucci as an alternative. They dug up the history of Kering (Gucci’s parent company) executive management purchasing looted bronze zodiac heads (the rat and rabbit heads from the Old Summer Palace) and returning them to China in 2013. Whether this leads to a real lift in sales remains to be seen, but it shows that Chinese consumers care increasingly less about just the logo, looking instead at the track record and values of the management behind it.

Is this hitting LVMH’s sales?

This controversy doesn’t land in a vacuum. Luxury in China was already soft in Q2 2026, as we covered in our June Data Update.

Behind the paywall, I’ll brief you on the initial impact on LV’s sales and the consumer reaction across major social media platforms. These are data insights from our team at BigOne Lab, parent company of Baiguan.

We also do monthly data updates for secondary market investors in our Baiguan Pro tier. If you wish to continue monitoring the development of LVMH following the aftermath, we strongly encourage you to get a paid subscription. We are offering a free upgrade to the Baiguan Pro tier for all existing paid subscribers at Baiguan until the end of July.

The sentiment

BigOne Lab analyzed 58,000 raw posts across major Chinese platforms:

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_{Data: Tushare / Wind | Data Through: Jul 24, 2026 close}

China’s two technology boards -- the ChiNext and the STAR Market -- have ranked among the top-performing equity indices globally since the start of 2025. We have tracked this run in multiple prior notes. As in every other major equity market, AI has been the core engine of the upside.

Since late June, however, the tech indices have suffered a sharp correction. The defensive CSI Dividend index has begun to rebound. This move is broadly synchronous with the pullbacks in the US SOX and Korea’s KOSPI.

STAR nearly doubled while ChiNext surged -- then the peak arrived and the market started to reverse

Two forces, one China-specific factor

The global tech correction shares plenty of common causes. Both trading technicals and industry fundamentals are working in tandem.

On the trading-technical side: the prior run-up was simply too far, too fast. We have built a two-dimensional framework to track China’s AI bubble across various sub-themes, and found many of them have surpassed the peak expected growth rates and valuations of the last renewable energy bubble.

On the fundamental side, which is more central: the entire semiconductor chain -- i.e., upstream AI hardware -- has captured a disproportionate share of AI profits, cannibalizing downstream earnings. The long-term ROI remains uncertain, and the market is growing more anxious about this.

But the pressure facing the Chinese market has one factor that is its own: the imminent listing of ChangXin Memory Technologies (CXMT).

Monday: CXMT begins trading

July 27, Monday -- CXMT formally lists on the A-share STAR Market.

A widely circulated belief in the Chinese market holds that the IPO of a super-mega-cap inevitably marks the end of a bull run -- corresponding to an interim high in the index. The chart below, making the rounds across social media over the weekend, captures this sentiment.

Every major mega-IPO has clustered near an interim market top

I tend to look at it the other way around. Companies themselves prefer to IPO and issue stock at the peak of market sentiment, at a good price. That is what makes the pattern appear so consistently. The mega-IPO doesn’t cause the top -- the top, more precisely the extreme sentiment, enables the mega-IPO. But historical regularity is enough on its own to make investors de-risk ahead of time, and that may well be one reason for the magnitude of the recent sell-off -- even though China’s own leverage problem is nowhere near as severe as Korea’s.

Most investors are choosing to watch and wait. You can see it in the volume. The market is, literally, holding its breath for CXMT.

Volume has collapsed -- the lowest turnover of the entire drawdown

Why CXMT matters beyond China

The listing of this memory giant on the A-share market means China finally has a proper domestic DRAM player -- one with global scale and, potentially, global spillover effects.

Once CXMT has the capital markets’ backing, capacity expansion is a given. Historically, China’s pattern of pouring massive capital into manufacturing capacity expansion has earned the reputation of a “developed-country meat grinder” -- a process that can restructure profit pools across the entire supply chain.

That is not good news for competitors. Think autos and new energy vehicles. But it is potentially good news for consumers, and for companies unwilling to tolerate upstream price gouging -- a consumer-electronics giant like Apple, for instance, which is already reported to be sourcing memory from new Chinese suppliers.

ChiNext vs STAR: the split tells you where the pain is

Drilling into the A-share market, the first thing that stands out: ChiNext has fallen more than STAR.

The ranking inverts: dividends are the only positive line since the peak, and ChiNext suffered a bigger loss than STAR

Both are China’s tech boards, but the composition differs in a way that matters here. In short: the core optical module and memory companies sit on ChiNext before CXMT’s listing, while semiconductor -- including equipment, materials, and manufacturing -- is concentrated on STAR. The STAR Market was established later than ChiNext, and its listing rules tolerate pre-profit companies, specifically to support capital-intensive early-stage semiconductor businesses. As a result, semiconductor density on STAR is far higher.

Let’s first look at the ChiNext market.

Chinese investors habitually sort the optical-module names into the “overseas chain” -- they follow US AI capex, and many supply directly to NVIDIA or American hyperscalers. Most memory names, by contrast, were until CXMT’s arrival peripheral players -- companies that profited from the appreciation of memory inventory without being the primary beneficiary. Their valuations have been cut recently as the real big guy is coming.

For example, Techwinsemi (001309.SZ) -- a storage controller chip designer -- has hit consecutive limit-downs and is now treated as a sentiment bellwether for the entire speculative memory trade.

Storage has been cut nearly 40% -- far worse than optical modules

Six consecutive limit-downs: Techwinsemi as the market’s sentiment bellwether

STAR’s resilience: self-reliance premium, and the picks-and-shovels bid

STAR’s drawdown is light compared to ChiNext, and close to CSI 300 -- the latter stuffed with high-dividend names that have been relatively defensive in this sell-off. STAR also carries something CSI 300 does not: a semi self-reliance premium, the narrative of China’s domestic semiconductor ascent.

Here is the interesting part. If you crack open the semiconductor sector itself, you find that semiconductor equipment and manufacturing are actually up during this drawdown.

Equipment and manufacturing held firm

What is the market thinking? Part of the answer, in my view, is that CXMT’s listing, expansion, and the broader memory capacity build-out all depend on massive upstream semiconductor investment. These equipment and materials companies are the direct beneficiaries.

This logic lines up with a recent Bernstein note, dated 13 July 2026: Global Semis -- Can semi cap work if memory doesn’t? Their answer is yes. Bernstein shows that the historical correlation between memory and semiconductor equipment (WFE) share prices is only 0.4-0.6. There have been multiple two-year stretches where WFE outperformed memory by 38-49 percentage points while memory went sideways or down. Their argument: memory capex is accelerating globally, and that capex is the WFE order book. Equipment can work even when memory doesn’t.

Semiconductor manufacturing and equipment in Chinese market are especially resilient for the same reason: The companies in those two sub-indices are, in many cases, directly linked to CXMT -- they are its suppliers. The market may well be pre-trading the benefit of CXMT’s capex ramp before the listing even happens.

The pricing map: huge divergence, freezing sentiment

As for what happens after CXMT lists, the market itself is deeply divided. One thing that is different this time: in the month or so before the offering, the market has already absorbed a violent drawdown. Sentiment has reached a relative freezing point -- the ¥1.94tn turnover print on July 24 is the lowest of the entire correction.

The most optimistic prediction earlier was that CXMT would open straight to ¥5 trillion in market cap. That number is now scoffed at by most investors.

Below is a widely circulated scenario analysis of CXMT’s Day-1 market cap and its market impact.

Accordingly, the best outcome for the market is a mild open -- a Day-1 print near or below the ¥3tn fair-value anchor, letting the re-rating of related names unfold over a month rather than cashing it in on day one. On the prediction markets, fewer than 35% of participants now believe CXMT will open above ¥3tn. If that is the case, it would be a healthy de-expectation. We will see what happens tomorrow.

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We publish more deep dives like this in for our Baiguan Pro subscribers. In the article, you’ve seen a few examples, including our recent take on the framework proposed to evaluate China’s AI bubble:

and our latest check up after the market correction:

The aforementioned rebound of the dividend stocks is actually a much long-term themes we think that worth investors' attention, which we discussed in a previous Baiguan Pro deep dive:

We also share our team views toward Chinese assets every month, and our proprietary data at BigOne Lab to help you stay updated on the performance of key names and sectors.

For investors who wish to receive more targeted content on Chinese secondary market investments, we recommend that you get a paid subscription with us, as we are offering free upgrade to Baiguan Pro for all existing paid subscription tier. The offer ends on Jul 31.

If you are already a paid subscriber with us, feel free to reply and let us know if you would like to be upgraded to the Baiguan Pro tier.

CER is a C-level executive at a top healthcare company in China with a career of more than 2 decades spanning healthcare, internet platforms, and AI in China. CER writes about biotech, advanced manufacturing, and AI in his Substack.

We can’t think of anyone else other than CER who is more capable of commenting on the future of healthcare in China and its implications for the entire world.

We helped CER translate and edit this piece, originally written in Chinese.

China may attain healthcare’s Holy Grail: cracking the “impossible trinity”

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The “healthcare Holy Grail" is a global problem.

Every healthcare system in the world is trying to solve the same impossible trinity: affordability, service quality and accessibility.

Few can deliver all three at once. Cheap care can erode quality. High-quality care can narrow access. Broad access can push costs upward. China matters because it is trying to move this global frontier at population scale.

The United Kingdom gets relatively close on universal coverage. NHS patients face low direct payment pressure and can access a high-quality clinical system. Accessibility is the constraint. Triage, referrals and queues turn “free or low cost” into delayed care. Nuffield Trust data show that in January 2026, 11.5% of CT waits in England exceeded six weeks. NHS England treats the six-week diagnostic target as a key prerequisite for the 18-week referral-to-treatment standard. The British model shows the tradeoff clearly: affordability and clinical quality can coexist while time becomes the bottleneck.

The United States sits at the other end. It has the world’s strongest high-end hospitals, specialty care, innovative drugs and medical devices. Affordability is weak, and accessibility depends heavily on insurance coverage, network status and ability to pay. KFF’s 2026 update shows that 36% of U.S. adults skipped or postponed needed care in the past year because of cost; among uninsured adults under 65, the share was 75%. HCCI’s imaging brief shows that in 2022 the average employer-sponsored insurance price for a CT scan was about $1,116, versus about $456 under Medicare. Those figures are not directly comparable to Chinese public prices, yet the order-of-magnitude gap says enough: American medical capability is strong, and so are the bill and the insurance gate.

U.S. friction starts with price and continues through insurance process. After the murder of UnitedHealthcare’s CEO, AP reported a surge of public anger online around insurance delays, denials and “delay, deny, depose” rhetoric. KFF data show that Medicare Advantage plans fully or partially denied 4.1 million prior-authorization requests in 2024; only 11.5% were appealed, and 80.7% of appealed denials were fully or partially overturned. A 2025 Commonwealth Fund survey similarly found that among working-age privately insured adults who had experienced a prior-authorization denial, roughly 40% reported delayed care and 28% said a health problem worsened.

China sits in a third position. National medical insurance, public hospitals and government subsidies let most people enter the system and keep many basic services affordable. The weakness is uneven quality. Good doctors, advanced equipment and better patient experience still concentrate in top-tier public hospitals. Patients can enter the system, but getting the best doctors and services can still mean queues, referrals, personal networks and cross-city travel. China is strong on affordability and basic access. It is still trying to spread high-quality service beyond the top hospitals.

China’s healthcare reform is aimed at the hardest part of the triangle: after making care broadly affordable and reachable, China is now using institutional reset and technological advances to make good care more widely available.

But before I explain in detail how China is dealing with this monumental task, I want to first explain to you why this matters for you.

Why does China’s healthcare matter for the world

Over the years, the Western healthcare system has built a complete referral system, strict prescription controls and a professional gatekeeping structure.

On the surface, this system is defended as patient safety. In practice, it also works as a collusion between medical groups and the state, with commercial insurers adding another payment gate. The result is a system that protects institutions first and squeezes consumers second.

The alignment is visible in the way the system behaves. Government protects system legitimacy. Physician groups protect the professional gate. Insurers protect the payment gate. Each side can justify its position with the language of safety, compliance or cost control, yet patients encounter the same practical result: higher consultation fees, higher premiums, longer waits and more uncertainty before a simple health problem can be solved.

The contradiction is sharper because this system has also failed to protect patients from real harm. Purdue’s opioid marketing, and McKinsey’s infamous consulting advice to Purdue, showed how commercial interests could purchase influence throughout the medical system under the cover of professional legitimacy. That institutional legitimacy helped feed America’s opioid disaster.

For many common, low-risk conditions, the real need is much simpler. A patient can often describe symptoms, search basic information, use AI for navigation, consult a pharmacist or remote doctor, and receive common medicines, including antibiotics when medically appropriate, without turning the whole episode into a high-cost institutional journey. Prescription responsibility still matters. The practical question is why every minor illness should be forced through the most expensive gate in the system.

China has left a gray tolerance zone that the West often refuses to allow. Free or very low-cost internet consultations, pharmacy-linked remote doctors and fast medicine delivery make it much easier to obtain common drugs that can solve immediate problems. Its operating logic is to keep complex judgment inside hospitals and doctors’ hands, while moving simple, frequent and low-risk demand into cheaper, faster fulfillment chains.

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Institutional innovation: from hospital center to multi-entry system

China’s earlier healthcare structure was hospital-centered, especially around high-level public hospitals. Patient entry, doctor resources, drug flows, diagnostic and treatment pathways, payment interpretation and trust all concentrated around the hospital node. This structure can handle complex care and basic coverage, but it also pushes many simple consultations, follow-ups, prescriptions, tests and explanations into high-cost in-hospital workflows.

Over the past several years, anti-corruption, volume-based procurement, DRG/DIP payment reform, sunshine income reform and prescription outflow have all been reorganizing that old structure. The point is less a moral indictment of doctors or pharmaceutical companies than a compression of non-clinical incentives and in-hospital channel rents. Resource-allocation power spills out of a small number of top hospital nodes, while both doctor income and hospital income are pushed toward more transparent structures.

DRG stands for Diagnosis Related Groups. It bundles inpatient cases with similar clinical processes into “payment groups”, so insurers pay by group, leading hospitals to have stronger incentives to control cost and standardize care.

DIP is diagnosis-intervention packet payment, a method closer to China’s own insurance practice: historical real cases and cost data assign point values to diseases or combinations, and settlement happens within a budget.

China’s National Healthcare Security Administration says that by the end of 2023, more than 90% of coordinating regions had launched DRG/DIP payment reform; the 2.0 grouping was built from 53.71 million DRG cases in 78 cities and 47.87 million DIP cases in 91 cities.

The core transition moves from a hospital-centered initial state to a future structure.

In the initial state, care, patients, drugs, channels and payers rotate around hospitals. “Care” means doctors and hospitals; “patients” are the demand side; “drugs” includes drug and device companies; “channels” include pharmacies and out-of-hospital service nodes; “payers” include basic medical insurance, commercial insurance, employers and other payment sources.

The future structure is a multi-entry, multi-payer, multi-channel service network. Hospitals remain the center for complex disease, acute care and difficult diagnosis, while basic entry points diffuse into community care, online care, pharmacies, home testing, home service, internet follow-up and compliant prescription loops.

In the transition map below, the horizontal axis is distribution inequality, similar to a quasi-Gini concept. It describes whether benefits, resources and service interpretation power are concentrated in a few in-hospital nodes, prescription authorities and payment chains. The vertical axis is ecosystem diversity: the richness of healthcare services, payment layers, drugs, devices, internet hospitals, home service, pharmacies and channel nodes.

Low diversity and high inequality define the initial state, while higher diversity and lower inequality define the future state. The transition map gives the overall direction: entry, payment and fulfillment nodes spread outward, while hospitals return to complex care and difficult diagnosis. Patient entry points multiply, channel nodes become denser, pharmaceutical companies and hospitals are recalibrated, and payers move from a single basic-insurance anchor toward a more layered organization. What China is essentially doing here is to pursue anti-corruption, payment reform, internet healthcare, drug and device industrialization, and innovation-drug/device capability upgrading at the same time.

Follow the money: who pays for China’s healthcare?

The payment structure shows why institutional reform is necessary. My directional estimate of China’s healthcare payment market reorganizes spending by final payer and risk-pool attributes. Currently, government payment remains the anchor, while patients’ out-of-pocket cash payment is still large. On the other hand, employer payment and commercial insurance are still small.

Future change can come from this underbuilt layer. Government policies increasingly frames human capital as an investment, while companies are also rethinking employee health through productivity, ESG and employer-branding lenses.

If commercial insurance, employer benefits and innovative payment can be improved, China’s healthcare system could avoid a narrow choice between basic insurance and household cash payment. Higher-quality services would gain another more stable layer of purchasing power.

Technology: pushing the frontier outward

While institutional reform opens the door, technology and industrialization decide how far the system can move. China’s healthcare story is policy, AI, digital service layers, cheaper equipment, innovative drugs, and dense service networks moving at the same time.

First comes application technology. China is more willing to apply internet healthcare, AI triage, report explanation, risk prompts and follow-up assistance. AI cannot replace physician diagnosis, prescription responsibility, or pharmacist review, but it can take on health navigation, risk stratification, follow-up reminders, report interpretation, and low-risk consultation entry. Many mild consultations, follow-ups, chronic-disease prescription renewals and standardized medication questions can be organized at lower cost.

Second is industrialized cost reduction. China turns many medical devices and testing services into industrial products. CT, MRI, ultrasound, lab tests, home sampling and portable diagnostic equipment can become much cheaper through manufacturing scale and dense services. A 2025 China Daily report on National Healthcare Security Administration pricing guidelines said CT prices in some provinces had fallen to around RMB 200, while MRI prices had fallen to around RMB 500. A 2024 People’s Daily Chengdu case showed CT plain scans falling from RMB 240 to RMB 200 per scan site, with reports available in about two hours. In general, domestic CT equipment costs about one-third of imported equipment, and the lowest ordinary CT scan price was under RMB 50. Lower equipment and service costs are themselves a form of accessibility.

Third is the strengthening of medical-device and new-drug R&D capability. China’s innovation-drug license-out activity has become an important source for the global biopharma industry. Publicly announced cases show that Chinese capability is extending from medical-device manufacturing into innovative drug assets and clinical value itself. For Chinese consumers, the real significance is better drugs, more reliable devices and lower total cost. Overseas revenue is only the external validation of that capability curve.

Fourth is service-network density. China’s population density, logistics and local-service infrastructure make home testing, medicine delivery, internet follow-up, pharmacy O2O and health management easier to build. The low-friction front door is made of homes, pharmacies, online consultation and offline fulfillment. Its value comes from organizing scattered touchpoints into one service network.

Conclusion: the grail is not captured in one move

China is likely to build a hybrid system: government insurance as the base, commercial insurance and employer payment supplementing higher-quality services, out-of-hospital channels handling fulfillment and follow-up, internet healthcare, AI and home service reducing entry friction, and innovative drugs and medical devices lowering cost through industrial capability.

The system has to prove that it can improve all three metrics at the same time: let more people access care, keep basic care affordable, and allow higher-quality services to spill beyond a small number of top public hospitals. Institutional innovation breaks up the old structure. Technology and industrialization lower cost. Dense service networks move capability closer to patients.

The impossible trinity will remain. The more realistic change is that the feasible boundary moves outward. China is trying to break services that used to require high-cost institutions into smaller, cheaper, and denser modules, then reconnect them through compliant payment and service networks. If this route works, overseas readers should pay attention to a healthcare operating system that is cheaper, denser, and easier to scale.

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China is entering the 15th Five-Year Plan (2026–2030) with a rare explicit number on consumption. In July, the State Council approved the Expansion of Consumption 15th Five-Year Plan, setting a quantitative target: social retail sales of consumer goods around RMB 60 trillion by 2030. For a country that has spent post-COVID years trying to reflate domestic demand, that kind of headline number matters. It reads like a clear, unambiguous priority.

So many investors are asking the same thing: Is this the window where Beijing finally puts serious stimulus behind domestic consumption? A numeric target in a five-year plan can feel like the setup for a beta trade — especially when consumer equities already look depressed.

1/4 China’s consumption names are cheap but still unloved

The consumer staples and discretionary sectors remain deeply discounted at a 25–27% five-year percentile after a mild rebound, standing in sharp contrast to the CSI 300’s elevated 92.7% percentile. This stark valuation divergence clearly reflects how capital markets are pricing a K-shaped economic reality—buoyed by strong momentum in the “new economy”, specifically AI and data centers, while domestic consumption remains sluggish.

In a past Baiguan Pro issue, we highlighted how computing infrastructure and new energy leaders have been replacing traditional enterprises within the CSI 300. Consequently, the index itself has transformed into a much more accurate proxy for China’s emerging 'new economy.'

2/4 Does the RMB 60 trillion target mean massive stimulus is coming?

From 2025’s RMB 50.1 trillion (+3.7% YoY), reaching ~RMB 60 trillion by 2030 requires only about 3.7% CAGR. That is almost exactly the 2021–2025 post-COVID trend (~3.3%). The current H1 2026 run-rate of +1.3% would miss the target badly.

The target in the plan just asks China to keep its post-COVID trend: some improvement from today’s soft goods print is implied — but nothing like a boom. Cheap ≠ buyable beta.

3/4 Households are still spending on services

Although consumption of goods and staples is likely to remain sluggish (not a broad beta rebound), China is not in a total spending freeze. Service retail has maintained a mid-5% YoY growth band for a year. (As of 2025, per capita services consumption made up 46.1% of China’s total consumption.)

4/4 “Services” is not one trade: where is organic growth inside services — and how to express it?

Organic growth in the services sector is heavily concentrated in experiences, led by tourism consulting and leasing (+11.3%), as well as culture, sports, and leisure (+10.4%). Conversely, catering (+2.8%) is actually dragging the overall average down.

By “experiences,” I refer to high-engagement, in-person activities. This momentum is vividly captured by the surge in live performances (+28.3%) and museum tours (+24.6%) [*]. Inbound tourism has also rebounded strongly, driven by an expansion of visa-free arrivals that catalyzed a 30.6% year-over-year growth in visitor trips.

Other categories, such as education, are notably absent from the highlights. Given China’s demographic headwind of a declining population, I personally think education is unlikely to drive significant organic growth going forward.

This means that secondary-market expressions need to be selective. Frankly speaking, exact equity proxies for China’s “experience economy” are still quite elusive. To bridge this gap, we are taking a first cut at constructing a basket that best captures this interest-driven, experiential growth. Our basket spans OTAs, live-experience ticketing platforms, hotels, and digital discretionary categories like gaming and entertainment. More on this in our Baiguan Pro tier.

Ending notes: possible 2H catalysts for consumer names

Apart from longer-term themes, HK internet and e-commerce giants could see several positive catalysts in H2 this year as delivery wars quiet down and profit margins improve. Specifically, the commercial landing of AI and agentic applications could provide strong catalysts for upside given current depressed valuations.

For instance, the expansion of cloud services, Kuaishou’s Kling, Tencent’s WorkBuddy (which the company claims is China’s most used productivity AI agent by DAU), and the launch of agents within the WeChat ecosystem could all serve as positive catalysts for H2.

Disclaimer: For informational purposes only. Not investment advice.

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On April 1, we officially launched Baiguan Pro, our professional-tier subscription designed for investors seeking deeper, more specific coverage of Chinese equities. Baiguan Pro delivers the Baiguan team’s monthly outlook on overall Chinese equity assets, our quarterly focus on themes and sectors, richer company-level analysis, and follow-ups on the ideas and companies previously presented in the newsletter.

As a reminder, existing paid subscribers can claim a complimentary upgrade to Baiguan Pro (offer runs through July 31, 2026) by simply replying to this email. You could also consider signing up for a paid subscription and emailing us for a free upgrade! )

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On April 1, we officially launched Baiguan Pro, our professional-tier subscription designed for investors seeking deeper, more specific coverage of Chinese equities. Baiguan Pro delivers the Baiguan team’s monthly outlook on overall Chinese equity assets, our quarterly focus on themes and sectors, richer company-level analysis, and follow-ups on the ideas and companies previously presented in the newsletter.

As a reminder, existing paid subscribers can claim a complimentary upgrade to Baiguan Pro (offer runs through July 31, 2026) by simply replying to this email.

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When we last took stock of the bubble cycle in early June, Chinese technology shares were still racing higher. What followed was a violent round trip: one final surge, then a sharp reversal across the sector. The global technology trade was increasingly moving in the same direction, but China’s market still carried its own distinctly Chinese characteristics.

Note: All four indices are rebased to 100 at their first common trading observation in 2025. The vertical line marks the SOX peak on June 22, 2026. Data run through July 14, 2026.

The move told us two things. First, in the final stage of the upswing, the rally had started to move well beyond companies with visible earnings. Second, when the selloff began, some parts of the AI trade proved more resilient than others.

Semiconductor equipment, materials and broader semiconductor self-reliance themes, excluding memory, became the last leg of the rally. The rally moved beyond optical modules and memory, where profits were already visible, into areas where Chinese investors were pricing in outcomes much further in the future.

We can use the same bubble-progress framework again to see what changed over the past month.

Arrows run from June 1 to July 10, 2026 and use a strict common sample. The clearest valuation expansion occurred in semiconductor equipment, materials and manufacturing, even though their required earnings-growth assumptions changed little.

The framework is deliberately simple. We use the peak of the 2021 A-share new-energy bubble as a stress benchmark. At that peak, a representative basket of new-energy leaders implied a 46.6% expected earnings CAGR from 2021 to 2023 and still traded at 51.4 times expected 2023 earnings. We set each of those readings to 100%.

The themes we track, most of them centered on AI and technology, are plotted against the same two yardsticks. The horizontal axis is current 2028E PE divided by 51.4 times; the vertical axis is the expected profit CAGR required from 2025A to 2028E divided by 46.6%. Moving right means valuations are more stretched. Moving up means more earnings growth must still arrive. Each arrow shows how a theme moved between June 1 and July 10, 2026. The map measures how much expectation stress Chinese investors are pricing in relative to a previous A-share extreme.

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The upper-left quadrant: profit leaders

Optical modules and memory remain in the upper-left quadrant. The themes in this quadrant carry expected profit growth above the peak of the previous bubble, but their forward PE multiples would be relatively moderate if that growth is delivered. They include some of China’s most profitable technology companies and some of the clearest beneficiaries of the AI infrastructure buildout. They were also the focus of our previous article. Memory, in particular, has become the market’s immediate focus and one of the core engines of the broader AI boom.

The 2026 H1 financial reports have yet to be published, so most analysts have not marked up their 2028 forecasts. Two domestic memory companies, however, have already released H1 earnings forecasts. If their first-half profit run rates are annualized, their 2026 net profits alone, even assuming no further growth, would already exceed analysts’ previous consensus forecasts for 2028 net profit.

The harder question has not changed: is memory still a cyclical industry, or is AI demand turning it into something closer to a growth business over a much longer time horizon?

That is now one of the central debates in global markets, and Chinese investors do not have a definitive answer. Memory scarcity has produced extraordinary margins, but it has also invited resistance from customers, including Apple and the major cloud service providers.

Those arguments are already familiar. Two less familiar perspectives are shaping the debate inside China.

The first comes from politics. Some Chinese investors believe the U.S. will not accept Korean memory suppliers capturing the largest share of the profit pool across the AI value chain indefinitely. It is a political-economy lens: markets do not operate in isolation from politics, and political power can reshape how value is divided across a strategic supply chain. That assumption no longer feels far-fetched. In the Trump era, the U.S. administration has shown a willingness to defend domestic interests through direct and highly visible intervention.

Though the recent KOSPI drawdown more likely reflects deleveraging, that is also a pattern Chinese investors know well: even when the fundamental story is intact, deleveraging can turn a crowded trade into a forced unwind, as it did during the 2015 A-share selloff.

The second perspective concerns the expected listing of ChangXin Memory Technologies, or CXMT.

The A-share market has never had a true heavyweight memory producer. That makes the prospect of a CXMT listing both exciting and unsettling. The excitement is straightforward: Chinese investors would finally gain access to a company that matters to the industry’s core economics, rather than having to express the memory cycle through peripheral proxies. Many of those proxies are module makers whose profits owe as much to inventory appreciation as to durable competitive advantage. Techwinsemi is a typical example. It is also one of the constituents in our memory-theme tracker. By July 14, it had fallen 24.1% from its own June 29 high, far more than the 11.5% drawdown in the STAR & ChiNext 50.

Source: CXMT IPO prospectus; Futu OpenAPI financial statements for Micron and SK hynix; cross-checked against Wind Financial Data Service. All figures refer to a single reported quarter closest to March 31, 2026. CXMT: Q1 2026 net profit attributable to owners; SK hynix: Q1 2026 net profit attributable to parent shareholders; Micron: fiscal Q2 2026 GAAP net income attributable to parent shareholders for the quarter ended February 26. Values are shown in USD; CXMT is converted from RMB at RMB 6.77 per USD. Reporting periods and accounting standards differ, so the comparison should be read as an indication of scale rather than a precise like-for-like ranking.

The anxiety is about liquidity. A listing of this size could absorb a meaningful amount of capital. It also touches an old scar: PetroChina’s 2007 debut, which arrived near the peak of that market cycle and became a lasting symbol of what can happen when an industry giant lists at the wrong moment. Chinese investors tend to be wary when a national champion comes to market amid already elevated expectations.

A second anxiety is valuation. CXMT’s official IPO pricing implies an equity value of roughly RMB 579 billion, but Chinese investors widely expect a much higher valuation once the stock begins trading, because A-share IPOs are typically issued at a discount to the price investors hope the secondary market will pay. RMB 3 trillion has become a shorthand for the bull case. If CXMT’s annual profit is roughly RMB 100 billion, that bull case would imply close to 30 times earnings. SK Hynix, by contrast, still trades at a single-digit forward earnings multiple despite being one of the global leaders in memory. That creates an implicit ceiling: Chinese investors want to price CXMT as a scarce national champion, while global memory comparables still impose valuation discipline.

Let us look more closely at the upper-left quadrant. A deeper dive shows that optical modules and memory have behaved quite differently in the Chinese market. China’s memory trade still takes much of its direction from overseas markets, while optical modules have developed greater independence.

China’s A-share optical companies are globally significant in their own right. Zhongji Innolight, Eoptolink and TFC Communication sit at the centre of the global AI interconnect buildout. Their share-price behavior has consequently developed a degree of independence from overseas optical peers, and they proved more resilient when the broader technology trade reversed.

The difference becomes clearer when the Chinese baskets are compared directly with their global peers. China’s optical module basket looks more independent: it gained more than the global basket and gave back substantially less from both its worst drawdown and its latest high. Memory tells a different story. The global producer basket delivered much stronger upside, while Chinese memory did not show superior resilience on drawdown.

Dynamic equal-weight baskets are rebased to 100 at their first available value. SanDisk enters from February 13, 2025; Kioxia enters from January 6, 2025. Data run through July 14, 2026.

The broader validation points in the same direction. Daily correlation between the Chinese and global optical baskets was only 0.16. For memory, correlation rose to 0.43. Optical modules are not fully detached from global markets, but their domestic price formation has been meaningfully more independent.

That relative resilience of the first-quadrant players, supported by earnings prospects, helps explain why many Chinese investors still expect optical modules, and to a lesser extent memory, to lead any credible rebound. Both corrected sharply, but neither has lost its claim to earnings leadership. Our bubble-progress monitor will keep tracking these companies as a priority.

Profit support is not the same as bottleneck power

Not all upper-left themes deserve the same priority, however. Most of them are parts of the AI supply chain and have genuine earnings support. PCB and liquid cooling are obvious examples. They sit in the upper-left quadrant: earnings expectations are demanding, but forward valuations remain relatively moderate if those profits are delivered.

But profit growth alone does not necessarily create bottleneck power: the ability to sit at the point in a supply chain where profits and value tend to concentrate. GPU, the first major bottleneck in the AI buildout, drove Nvidia’s extraordinary re-rating. Scarcity then shifted toward memory. In both cases, a handful of companies controlled the essential technology and capacity, while new supply took time to arrive.

PCB and liquid cooling do not have the same structure. Capacity was not fundamentally scarce before the boom, expansion is easier, and credible suppliers are numerous. Chinese companies already hold meaningful market share, and their ability to add capacity quickly is hardly in doubt. The same demand surge can therefore produce strong earnings without producing durable scarcity rents. That can restrain the room for further valuation expansion.

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Where can the money go next if AI trade gets too volatile?

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As a reminder, existing paid subscribers can claim a complimentary upgrade to Baiguan Pro (offer runs through July 31, 2026) by simply replying to this email.

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In Today’s Data Update

Chinese consumer names have spent all of 2026 being marked down. It is a two-speed market: AI and semis melt up while almost anything tied to the household wallet de-rates. With the whole complex this depressed, the more useful question than “is the consumer weak” (it is) is whether any names are now mispriced against their own idiosyncratic drivers.

We are updating the sectors we’ve most recently covered in the newsletter and flagged in Baiguan Pro, with BigOne Lab’s proprietary data as of June 2026:

• Sportswear & footwear: We ask how much June’s promotions (618 festival sales) pulled demand online and away from stores, and which brands held the line. Most of all, after our piece on Lululemon’s Great Wall drum scandal — which forced an apology and a campaign pull right into the 618 window, on top of April’s “forever chemicals” probe — we examine whether the controversies surrounding Lululemon are finally visible in the sales data.

• Gold & jewelry: Laopu has de-rated hard as gold prices correct from record highs. The question is whether June’s data shows its monthly sales trend beginning to trough, and why fixed-price heritage gold and floating-price mass jewelers may be pulling apart.

• Luxury goods: Q1 was about dispersion, not recovery. We look at whether Q2 sustained the split — which brands kept siphoning high-net-worth spend, and which megabrands lost more ground.

• E-commerce & 618: we refresh monthly GMV across Tmall, JD, Douyin and Kuaishou and read the full 618 cycle as a temperature check on overall consumption. Did 618 signal any pickup, or more of the same?

• Pop Mart: the stock’s drawdown is a verdict on LABUBU concentration. We examine whether June’s new-product slate and a broadening IP base support or undercut that worry.

• Tea & coffee: following Is the delivery war drawing to an end?, we ask whether lighter platform subsidies are finally delivering the margin relief bulls expected — or whether the fight has simply moved to the storefront.

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.

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The arithmetic at the point of issuance is almost misleadingly modest. If CXMT raises RMB 29.5 billion by selling roughly 10% of its post-IPO equity, the deal implies a valuation of around RMB 295 billion. Yet the company’s prospectus estimated that its 2026H1 profit would reach between RMB 66 billion and RMB 75 billion. If we take the median, annualize it, and apply a multiple of only 6-8 times, we would place the company’s value somewhere around RMB 800 billion to RMB 1200 billion, which would still be only ~1/7 the size of SK Hynix or Micron.

The A-share market may go much further. CXMT would give domestic investors their only listed large-scale Chinese pure-play DRAM manufacturer, a strategic semiconductor asset, and a scarce way to gain exposure to the memory boom. The Financial Times reported analyst estimates of a post-listing valuation as high as RMB 3 trillion. That would put CXMT among the largest A-share companies, if not the largest.

The timing could hardly be better. AI has driven demand for high-bandwidth memory and server DRAM, while the established manufacturers have shifted more capacity toward those higher-margin products. That has tightened the supply of conventional DRAM used in PCs, phones, and ordinary servers, exactly where CXMT is strongest. Tencent has reportedly signed a multiyear supply agreement worth nearly US$3 billion, giving CXMT something a commodity-market entrant rarely enjoys: a large domestic customer and several years of demand visibility.

In a previous Baiguan article about CXMT, we argued that the company was not yet a black swan for Samsung, SK Hynix, and Micron. It was a gray rhino. Its technological gaps in HBM and advanced server memory remain real, but its approach has been visible for years and is now too large to ignore.

This article is about the city behind that gray rhino.

A government that invests like a venture capitalist

The “Hefei model” is often described as one unique form of China’s industrial policy. Its most distinctive feature was for the government to act as an equity investor.

The playbook works roughly like this. The municipal government identifies an industry with strategic value and finds an anchor company at a critical point in its development. City and development-zone entities take a large equity stake. The government then coordinates land, infrastructure, bank financing, and supplier recruitment around the anchor. If the company succeeds, the city gains a new industrial cluster while its investment vehicles gain valuable shares. Financial returns, experienced personnel, and political credibility can then be recycled into the next project.

The three canonical cases are BOE, CXMT, and NIO, although each represents a different version of the model.

BOE already existed when Hefei made its first large bet on the display-panel maker in 2008. The city helped finance and attract a sixth-generation LCD production line at a time when BOE needed huge amounts of capital, and China remained dependent on imported panels. The bet eventually made Hefei a center of China’s display industry.

CXMT was closer to a company that Hefei helped create. When the DRAM venture was launched in 2016, Hefei-backed capital reportedly provided RMB 14.4 billion of the first phase’s RMB 18 billion funding. The city supplied capital and facilities, then helped build a cluster of packaging, testing, gas, materials, and equipment suppliers around the fab. The technology and management did not come from the municipal government. They came from Zhu Yiming and GigaDevice, former Qimonda engineers, acquired intellectual property, and international DRAM expertise. Hefei’s contribution was to assemble these ingredients and give them time.

NIO was a rescue-and-localization investment. In 2020, when the electric-vehicle maker was close to running out of cash, Hefei-linked strategic investors agreed to put RMB 7 billion into NIO China. NIO moved its China headquarters to Hefei and placed its core China assets in the local entity. The deal saved the company at a critical moment and strengthened Hefei’s EV cluster. Whether NIO will become a durable, profitable company remains unsettled, so it is better treated as a successful rescue than as a finished industrial triumph.

SemiAnalysis calls the CXMT story “The Patience of State-Venture Capital” (emphasis our own):

Hefei’s state-venture capital could afford to lose money for a very long time. Unlike a private venture-capital fund answerable to LPs that expect a return on a fixed timetable, Hefei’s state-venture capital, ultimately backed by the city’s municipal and development-zone state entities, faced no such clock. They kept funding a company that, even after turning its first annual profit in 2025, still carried an accumulated deficit of roughly RMB 36.65 billion built up over nearly a decade.

This view, however, is only partially right. In fact, in China, Hefei is the exception, rather than the rule. Understanding this question well will go a long way to explain why the “Hefei Model” has not been able to inspire more followers today.

The balance sheet has no clock, but the bureaucrats have

The idea that the Chinese state capital is naturally patient often mixes up two different levels of government.

Yes, Beijing can maintain a strategic priority for a very long time. But that does not mean every province, city, development zone, or official operates with the same horizon.

The fundamental reason is that while China’s top officials often enjoy long tenures, its local officials do not.

A Chinese city leader normally has only a few years to make an impression in a particular post. Although not a statutory term, three to four years is a useful rule of thumb for the tenure of local leaders. One study of municipal political turnover found that around 72% of mayors and 80% of city party secretaries served for less than four years. Other research has shown that individual local leaders differ significantly in their effect on growth, and that those differences influence their promotion prospects.

Three years is enough time to build a road, launch an industrial park, or hold a factory-opening ceremony, but not enough to know whether a new DRAM manufacturer can become globally competitive.

Wanda, the largest operator of China’s commercial property, understood this political clock unusually well. A government-hosted profile of Wang Jianlin, Wanda’s founder, once explained part of Wanda Plaza’s appeal to local officials in a single sentence: a mall could open in 18 months, allowing local officials to see their “own” political achievement during their tenure. Under Wang, a former military man, construction began quickly. Investment and employment could be counted. A huge physical structure appeared. The opening ceremony usually took place while the officials who approved the project were still in office.

CXMT was the opposite kind of project. Its early progress was buried inside process recipes, yield rates, patents, and customer qualification. It required years of capital expenditure and operating losses. Almost a decade passed between the project’s launch and its first annual profit. By then, an ordinary city leader might have rotated through several different posts.

For simple bureaucratic reasons, successors in local government often do not prioritize their predecessors’ projects, if not actively undermine them (which is also common). For high-stakes, high-risk projects like these mega ventures, such a tendency not to follow the pre-designated roadmap can only be stronger.1

And this uncertainty enters the project before the investment is even made. An official considering a ten-year semiconductor bet must ask whether a successor will continue it, whether banks will believe that government support will survive a leadership change, and whether suppliers will relocate based on promises made by the current administration. The official must also consider whether years of losses will later be interpreted as proof of recklessness, perhaps by an auditor or disciplinary investigator who never shared the original assumptions.

This risk is not abstract. In a previous article about China’s search for “patient capital”, I described a state-owned fund manager who came under investigation because one portfolio company went bankrupt even though the fund as a whole had performed well. Such inquiries are commonplace today under the high-pressure anti-corruption environment.

Founders and financiers anticipate the same risks too. If they doubt that a city’s commitment will survive the next personnel rotation, they discount the promise today. Banks lend more cautiously. Suppliers hesitate. Project managers are pushed to deliver visible results before the technology is ready.

A conventional venture fund may face a fixed ten-year life, but its managers are financially tied to the same portfolio throughout that period. A municipal investment vehicle may exist forever while its political principals change several times.

Under some circumstances, this can make local state capital behave more short-term than a private fund, despite having a much longer-lived balance sheet. “Patient state capital” describes Hefei’s eventual achievement. It does not explain how unusual that achievement was.

What if the bet had failed?

Success makes the original decision look obvious. To understand the political risk, imagine the same story with a different ending.

Suppose CXMT had consumed tens of billions of yuan but never produced competitive memory. Hefei would have been left with a highly specialized fab, expensive equipment, suppliers recruited around an anchor customer that never reached scale, losses inside municipal investment vehicles, and credit exposure at local banks. A successor administration would have had to restructure the project while answering accusations that the original investment was a prestige project or a reckless gamble.

The same decision would acquire a completely different vocabulary. Strategic vision would become political vanity. Patient capital would become a refusal to recognize losses. Supply-chain construction would become stranded industrial assets.

Wuhan Hongxin Semiconductor shows what the failure scenario looks like. It was launched in 2017 with a planned investment of RMB 128 billion and ambitions to manufacture advanced logic chips. The project stalled amid financing and management problems. The local state-assets authority took control, and in 2021 the company dismissed its workforce without ever realizing its stated manufacturing ambitions.

CXMT and Wuhan Hongxin were not equivalent projects. CXMT had a serious founder, acquired technology, experienced engineers, and a commercially grounded product strategy. The comparison is about the decision facing a local official before the outcome is known.

Hefei had good judgment. It also had the good fortune to avoid a spectacular early failure long enough for the model to become self-reinforcing.

How Hefei escaped the local political clock

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Amid the backdrop of Chinese companies going abroad, a new phrase has been coined in China to describe this phenomenon: “token 出海” (tokens going abroad). In today’s newsletter, I want to share some of my recent reflections: how real this trend is, why it’s happening now, who’s selling, and the investment implications behind it.

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The “token export” trend is growing faster than anyone expected

The reason to trust the OpenRouter numbers is that OpenRouter doesn’t run any models itself. It’s a switchboard — it takes your request and sends it to whichever provider fits your price and latency, so its data captures genuine demand rather than marketing. And that data is stark. Chinese models surpassed US models on the platform for the first time in the week of February 9, 2026, and accounted for 61% of consumption among the top ten models, holding the top three spots.

Although the 61% figure represents the top ten models rather than all 400-plus models hosted on the platform, the overall direction is undeniable.

The market itself has also exploded. OpenRouter has scaled nearly 5× in the past six months, from roughly 5 trillion tokens per week to over 25 trillion in May 2026. This means China didn’t just gain market share; it took a bigger slice of a much bigger pie. Furthermore, a16z’s Martin Casado also estimated that roughly 80% of startups utilizing open-source AI stacks are running Chinese models.

Inside China, the curve is even steeper. Average daily token calls went from 100 billion in early 2024 to 140 trillion by March 2026 — more than a thousandfold in two years, per the National Data Administration (NDA). And Beijing has started treating tokens less like a technical artifact and more like a commodity you can meter, price, and export.

In March 2026, the NDA formally standardized the Chinese word for “token” (词元, cí yuán) and its director described tokens as measurable, priceable, and tradable. And in April, the port city of Shantou completed what officials called China’s first city-level “closed loop” for token exports: servers in China generate the tokens, an API call comes in from Southeast Asia, the answer goes back out, all under a compliant cross-border data arrangement. Nothing physical crosses the border — just the inference result.

Regulatory compliance still needs to be fleshed out, but the trajectory is clear—China views tokens as its next goldmine amid the global race for compute dominance.

Why it’s happening now: the frontier gap closed, and tokens got expensive

Two things happened in the last year that made this trend possible.

First, the performance gap between frontier models and other open-weight models is narrowing.

Stanford’s 2026 AI Index — the most-cited scorecard in the field — put the top US model just 2.7% (39 points) ahead of the top Chinese model as of March, down from a 17.5~31.6 point difference in mid-2023. Stanford’s own word for it was “nearly closed.“

In academia, the returns on all model training spending are also visibly shrinking: annual gains on the MMLU benchmark fell from 16 points in 2021 to under 4 in 2025 even as R&D budgets ballooned, and roughly half of the major benchmarks are now saturated — everyone clusters near the top, so the scores stop meaning much.

For the ordinary user tackling daily tasks, the difference between the number-one and number-five models is becoming nearly impossible to distinguish. After all, not every job is rocket science requiring a frontier model; for the majority of personal and business scenarios, a much cheaper model suffices.

My empirical observations are similar. In my own coding and software development projects, I don’t find a large enough difference between, say, GLM 5.2 and Claude Fable to justify the price premium. I’ve also tested these models on non-coding tasks—such as suggesting product improvements, brainstorming design solutions, or architecting system-level engineering robustness—and in most cases, they yield identical alternatives.

The second thing is that ”tokenmaxxing“ is ending. Enterprises are reevaluating ROI.

Management went from going all-in on agents to introducing monthly limits on tokens and model tiers in less than a year. As frontier model costs rise, enterprises are now exploring lower-cost, open-weight, or in-house options that ensure proprietary data ownership.

For instance, Palantir’s Karp has openly criticized “tokenmaxxing” as a viable business model, noting that several of its US clients supporting critical infrastructure are already running open models (NVIDIA’s open model) [*].

These exact shifts give China’s open-weight models a distinct competitive edge.

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China’s token export playbook

There are two distinct export routes.

The first route is to move only the tokens. The power stays in China, the servers stay in China, the model runs in China, and what crosses the border is the answer, delivered by API. That’s the Shantou model, and it’s where most of the OpenRouter volume actually lives. It turns cheap Chinese electricity into a services export with no containers and no tariffs.

Among China’s frontier labs, DeepSeek is closest to a “pure technology export” and acts as the industry’s price anchor. Operating with no prioritized B2B or B2C application strategies and no overseas offices, its global influence spreads purely through its open-weight models adopted by tens of millions of developers worldwide.

Zhipu AI (2513 HK), deeply Tsinghua-rooted, bases its strategy on three distinct pillars: MIT-licensed open weights, agentic coding, and—most distinctively—sovereign compute. Its GLM architecture is trained and served heavily on Chinese domestic accelerators (including Huawei Ascend, Moore Threads, Cambricon, and Kunlunxin). Its revenue is heavy on B2B and B2G, with 85% of its H1 2025 revenue coming from on-premise deployments to Chinese SOEs and financial institutions. However, it is racing to catch up with Western frontier labs—recently reported to match Anthropic’s Claude Fable 5 on specialized cybersecurity tasks.

Moonshot AI’s Kimi-K2.6 is arguably the premier open-weight native multimodal model on agentic benchmarks, capable of orchestrating up to 300 parallel sub-agents for autonomous coding loops. Commercially, it is the fastest-inflecting lab in the cohort: its Annual Recurring Revenue (ARR) surged to $200 million by April 2026, and its models are reportedly feeding Cursor’s training — meaning it’s already inside the Western developer-tool supply chain.

The second route is to export tokens, applications, and ecosystems simultaneously. Among Chinese labs, consumer-facing applications mostly dominate.

MiniMax is the consumer exporter, drawing about 70% of its 2025 revenue from overseas, driven historically by consumer apps (Talkie companion app, Hailuo video) and now increasingly by the multimodal capabilities and M-series API, whose M2.5 briefly led all of OpenRouter. Although Moonshot also derives revenue from its B2C applications, its user base remains mostly domestic as of now. MiniMax is, by a wide margin, the company earning the most overseas C-end revenue among the Chinese AI players.

Alibaba (Qwen) is China’s leading player in exporting a full-stack B2B ecosystem. It consolidates its models, cloud infrastructure, and chips under the Alibaba Token Hub (ATH) business group, and is rapidly expanding its data center footprint globally across South Korea, Malaysia, the Philippines, Thailand, and Mexico.
A massive driver of this global B2B strategy is the high volume of international developers downloading Qwen’s open-weight models from Hugging Face to host them locally. Ultimately, Alibaba’s play is to commoditize these open-weight models so that global clients become structurally locked into renting Alibaba Cloud’s compute ecosystem to deploy them.

What holds it back

The most important constraints are trust and jurisdiction, not capability.

Under China’s 2017 National Intelligence Law, companies must cooperate with state intelligence work, so every API call landing on a China-hosted endpoint carries an exposure no price cut can fix. But because the weights are open, Western hosts like Fireworks and Together serve the exact same models without any data touching China, at roughly double the first-party price — still cheap.

Nevertheless, enterprise adoption of Chinese models remains overwhelmingly low compared with that of smaller startups and individual users. Regulated, high-stakes workloads in finance, healthcare, and government stay with Western proprietary models.

Large enterprises still overwhelmingly buy from Anthropic, OpenAI, Azure, and Google Cloud, and US labs still capture most of the industry’s actual revenue even while losing volume. For instance, Anthropic holds ~12% of token volume on OpenRouter but captures ~46% of revenue [*].

Apart from the obvious geopolitics and regulations, localized sales execution is a real challenge faced by Chinese AI labs that wish to go B2B abroad.

One interesting story I heard from a friend in the industry shows the level of localization needed: one of their clients ended up choosing MiniMax’s voice model because it was among the only models that could provide a voice solution with the specific regional accents the client was looking for in that market. Despite the hype about AGI, the reality is that the sheer amount of detail required for localization still demands significant on-site, attentive human effort.

B2B sales require a strong local sales and marketing team to build client relationships —this means considering the nuances of language, business practices, and even local culture. This is the area where many Chinese companies still lack, despite their strong technical capabilities and excellent price-to-value.

Investment implications

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China today is not merely a large exporter. It is a super-exporter by any historical standard.

In 2025, China’s goods exports reached roughly USD 3.77 trillion, while its trade surplus rose to about USD 1.19 trillion. The scale is difficult to overstate. When we scan the modern World Bank/WDI record from 1960 onward, the historical peak is China in 2022: merchandise exports equal to about 3.45% of world GDP. China’s 2025 figure is slightly lower, at about 3.19%, but it still belongs to the same historically exceptional range and remains well above the peak levels reached by the United States, Germany, Japan or the United Kingdom in the modern data.

FIGURE 1

Historical Export Power Peaks

The composition has changed as well. China’s export machine is no longer defined mainly by garments, toys and low-value assembly. Batteries, electric vehicles, semiconductors, industrial equipment, automation hardware and AI supply-chain components now occupy a much larger part of the story.

That shift has made “China going global” one of the most attractive themes in equity investing. The logic sounds simple enough: China’s domestic demand remains weak, exports remain unusually strong, and listed companies with real overseas exposure should be able to deliver excess returns.

But once we studied the companies one by one, the story became much harder than that.

For this first piece in our quantitative series on Chinese companies going global, we scanned listed Chinese companies across A-shares, Hong Kong and the United States, then built what we call the China Global Champions 30. We deliberately started with scale. The primary criterion was overseas revenue: these companies had to generate a large and meaningful share of revenue outside mainland China, whether in developed markets or emerging markets.

We then used overseas revenue share, revenue growth, gross margin, ROE and business substance as secondary filters. The point was to avoid letting commodity-trading companies exaggerate their global scale. We also excluded state-owned enterprises, especially policy-supported financial institutions and state-linked commodity traders, where overseas revenue can be inflated by public resources, balance-sheet scale or trading flow rather than true market competitiveness.

The goal was not to find the most famous Chinese brands. It was to find listed Chinese companies whose global revenue base says something real about their competitiveness.

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FIGURE 2

China Global Champions 30

What Did We Find?

The result was more interesting than we expected.

The 30 companies fall into five broad groups: Consumer Brands, Global Supply Chain Champions, Digital Platforms, Global Resource Leaders, and Healthcare. Representative Chinese names include Lenovo or BYD in Consumer Brands, CATL and Zhongji Innolight in Global Supply Chain Champions, Tencent or Alibaba in Digital Platforms, Zijin Mining in Global Resource Leaders and BeiGene or WuXi AppTec in Healthcare.

Taken together, the China Global Champions 30 generated about RMB 7.2 trillion in total revenue in 2025, or roughly USD 1.06 trillion. Their overseas revenue was about RMB 3.0 trillion, or roughly USD 440 billion, equal to around 41.5% of combined revenue on a weighted basis. The average company in the group had a much higher overseas exposure, about 56.5%, because several smaller champions are almost entirely overseas-facing. Profit quality is mixed but not low: the simple-average gross margin was about 37.6%, with a median of about 31.6%. The full company list and short business descriptions are included in the appendix.

For readers who prefer familiar global analogues, the five groups roughly rhyme with Coca-Cola, TSMC, Google, BHP and Pfizer.

As many would expect, Consumer Brands are the largest category by both overseas revenue and number of companies.

Many of these consumer names started as functional brands: Lenovo in PCs, BYD and Great Wall Motor in autos, Midea and Haier Smart Home in appliances, Xiaomi and Transsion in phones and smart devices, Techtronic Industries in power tools, and Roborock in home robotics. They compete on engineering, reliability and value for money, but some are no longer only about “good enough at a lower price.” They are beginning to develop tone, aesthetics and brand appeal of their own. We also see the rise of newer, more playful and curiosity-driven retail brands such as Pop Mart and MINISO, where store experience, IP, design language and social sharing matter almost as much as manufacturing efficiency.

What is more surprising is the second-largest group. It is not Digital Platforms, the category that contains Alibaba and Tencent. It is Global Supply Chain Champions.

FIGURE 3

Category Revenue Mix

FIGURE 4

Overseas Revenue Share by Group

This fits the actual structure of China’s global rise. The country’s deepest advantage is still industrial: manufacturing depth, supplier density, engineering iteration and the ability to scale complex production quickly. The renewable-energy cycle created global leaders such as CATL and BYD (BYD also supplies batteries and automated manufacturing). The AI cycle is creating another cohort, from optical modules to PCB suppliers.

FIGURE 5

Overseas Revenue and Growth by Group

The supply-chain group looks much more dynamic than the names suggest. Its overseas revenue base is already large, and its growth rate is being pulled higher by AI hardware names such as Zhongji Innolight, Eoptolink, Longsys, Victory Giant Technology and Foxconn Industrial Internet. In other words, China did not miss the AI supply-chain boom. In some parts of it, Chinese companies are now more deeply embedded in the global AI capital-expenditure cycle than they were in previous technology cycles.

Digital Platforms come third. They still have high margins and powerful business models, but their international expansion is slower and more constrained. Regulation, localization, geopolitics and platform-specific policy risks all matter. The Great Firewall helped shield China’s internet companies from Western platform giants at home, but it also slowed the overseas expansion of Chinese internet companies. The result is a sharp contrast with the global brand-value distribution, where the most valuable brands are overwhelmingly digital-platform-led.

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FIGURE 6

Kantar BrandZ Global Top 20 Brand Value Mix

Global Resource Leaders and Healthcare remain smaller in this screen. That does not mean they are unimportant. It means their listed-company overseas revenue base is still less fully scaled than the consumer and industrial supply-chain groups. For Healthcare in particular, the road is long: Chinese companies are beginning to prove themselves through innovative drugs, medical devices and CXO services, but the category has not yet reached the scale of global pharmaceutical leaders.

The Top 30 therefore captures a distinctly Chinese pattern of globalization. Consumer-facing companies are important, but they are not always the brands non-Chinese readers know best. Many reach end consumers first through ODM/OEM relationships. Others acquire local brands to access overseas markets, while some are still building localized distribution networks of their own, as BYD is doing in autos. Meanwhile, the supply-chain companies often matter more than their brand visibility suggests. They do not always own the end-consumer relationship, but they own a critical position inside the global production system.

This is also why a straight comparison between China and the U.S. has to be made carefully, if any of you are interested. In the U.S., the public faces of global expansion are now a group of technology giants, digital platforms, and a few consumer-brand giants. In China, the global story is much more manufacturing-heavy.

There is another reason not to compare companies too mechanically. The U.S. domestic market is itself enormous, and it is one of the most important destination markets for many Chinese companies going global. Excluding the home market from U.S. companies can therefore create a distorted comparison. Many U.S. companies also have decades of global operating history. For Chinese companies, this cycle is still much earlier.

FIGURE 7

China Versus U.S. Manufacturing Share

So much for the fundamentals. In future parts of this series, we will go deeper into company fundamentals, compare China’s current going-global cycle with Japan’s earlier overseas expansion, and test different screening rules for a more growth-oriented China global basket. For now, what happens when we look at the stock market?

Here the picture changes completely.

At first glance, the equal-weight China Global Champions 30 index looks excellent. From early 2025 to June 26, 2026, it rose about 90.8%, far ahead of broad China benchmarks. That would seem to validate the theme.

FIGURE 8

Top-30 Equal-Weight Stock Index

But once we break it apart, the story is much less broad-based. The Supply Chain sub-index rose about 323.7%, while Consumer Brands were almost flat, up only about 1.2%. Digital Platforms and Resources had large drawdowns. The winners were concentrated in a narrow cluster of AI hardware and electronics names. Zhongji Innolight, Eoptolink, Longsys and Victory Giant Technology carried much of the performance burden, while many consumer and healthcare names delivered mediocre or negative stock returns.

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Macro & Sentiment Check

In May, the household risk appetite continued to rebound toward neutral, but the recovery relied more on capital markets (due to the recent bull run) than on the broader economy.

1. China Resident Risk Appetite Index (CRRAI)

Following April’s pullback to around -0.19, the May 2026 CRRAI composite reading rebounded to -0.06 — a +0.14 improvement on the month and a +0.13 increase over three observations.

At the 49.1 historical percentile, the risk appetite index is approaching the neutral territory, though May has not yet confirmed a clean, broad-based break into a risk-on regime. The improvement was very much driven by the capital market due to the recent bull run.

2. Institutional vs. Retail Sentiment

Retail investors in China remain steady in May and June without irrational optimism.

Big banks and international funds' sentiment is cooling after a sharp run in May.

Our Views This Month

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Fact vs. Fiction: The Reality of China’s Hukou System in 2026

By David Fishman

Back in May 2026, China’s State Council issued a new set of guidelines dealing with how basic public services are provided to Chinese citizens. Observers immediately noted a key shift: access to basic public services like education or healthcare was now phrased as based on “where people actually live”, instead of the location of their hukou. It is rare to see a Chinese policy choice that is well received both domestically and abroad, but this was one of those moments.

My social media was quickly flooded with comments supporting the policy change and explaining why it was now such a big deal to disconnect public services from the hukou location. Strictly speaking, they were not wrong: it would have been a big deal if this had actually been new. But it wasn’t. In reality, the State Council document was mostly just formally codifying a policy reality that had already existed on the provincial or municipal levels for several years. While this was already known by people who follow this area closely, the excitement from those who thought was a brand-new development helped to reveal who hadn’t been paying very close attention to the last decade of hukou reforms.

Modern Hukou History

In its earliest form, the hukou registration system was an intrinsic feature of labor allocation in China’s planned economy. Up until the 1980s, the Chinese state assigned urban jobs based on hukou location, and a position in an official work unit was only available to registered citizens of that location. Starting in the 90s, hukou registration no longer had a direct connection to employment location. This coincided with the economic transformation that saw hundreds of millions of inland workers migrate to the rapidly industrializing coastal regions. When they arrived, however, they still faced barriers to true integration with those urban economies. The key barrier was their hukou, because their public benefits as Chinese citizens (like healthcare or children’s education) were bound to their registration location, back in their hometowns.

The narrative employed by urban officials at the time was that this was necessary to prevent a surge of domestic migration from overwhelming limited municipal resources. This thought process is straightforward, and not even particularly unique to China. Many countries employ some version of this logic at local levels, where cities prioritize the provision of public resources to their own (taxpaying) citizens. China’s implementation was especially rigid, however, and when there are large gaps in quality between the public services in different regions, such measures can serve as a barrier to social mobility. When it comes to education, for instance, requiring children from less-developed regions to attend the weaker schools in those regions damages their prospects to attend stronger colleges and have better subsequent careers. Also, migrant parents were often forced to leave their children behind in their hometown for schooling while working in more developed regions, driving the well-known “left-behind children” phenomenon prevalent in the 2000s.

It should come as no surprise that this policy was a magnet for criticism. An arrangement that was, at least in theory, focused on the management and distribution of scarce public resources was clearly also a driver of social inequality. In the minds of its critics, both domestic and abroad, this became the defining characteristic of the hukou system.

Converting Rural to Urban Hukou

An additional wrinkle to the hukou issue is that there were originally two kinds of hukou: urban and rural (this is no longer the case today). Previously, converting a rural hukou to an urban hukou was administratively difficult, but many pursued it anyway. Beyond the obvious function of designating the citizen as a resident of an urban or rural administrative unit, their most notable distinction was that rural hukou holders were exclusively eligible to enjoy land usage rights in their village land collective. This included a share of the dividends if such land was expropriated to make way for a national project like a highway. A hukou in an urban unit enjoyed no such land-related privileges but qualified the citizen to participate in urban social programs, like the urban worker pension plan (which is more generous than the equivalent rural plan) and urban public services (which were generally of higher quality than equivalents in rural areas).

In the late 90s, the Chinese government began relaxing the policies around converting hukou from rural to urban areas, with pilots in small urban towns. By 2001, this program was formalised, substantially lowering administrative barriers to transfer a rural village hukou to an urban town hukou. Proof of employment and residence was still required, and implementation was always subject to local discretion with weak/no national enforcement, but reform was underway. However, it was still difficult for a rural hukou holder to convert to an urban hukou in a large city, typically requiring meeting high thresholds, including formal employment, educational qualifications, or property ownership.

Around this time, there were also some early moves to allow migrant workers to access public services based on where they worked, rather than being strictly tied to their hukou location. These initiatives were largely implemented at municipal levels and varied widely, but they took place against a broader central-government push for gradual hukou reform.

In 2001, the topic of hukou reform also caught the attention of the then-governor of Fujian province completing a doctorate at Tsinghua University, a promising young cadre named Xi Jinping. In his dissertation, titled “A Tentative Study on China’s Rural Marketization”, Xi urged an acceleration to hukou reform, noting that the system had “created a large income gap between rural and urban residents that should be corrected in a prudent and proactive manner” with “reform…to level out social services”.1

But at that time, Mr. Xi would not be advancing to the national spotlight for at least another decade, and the kind of reforms he was describing were still far away too. For the most part, Chinese citizens consumed public services at the location of their hukou registration, and migrant workers were broadly excluded from using the public services in the coastal cities they were helping build, a situation that persisted through the 2000s and into the 2010s.

The Dawn of the Modern Reform Era

In 2014, State Council Document No. 25 (2014), Opinions of the State Council on Further Advancing the Reform of the Household Registration System launched a new phase of hukou reform. First, the urban-rural binary designation for hukou type was formally abolished in favor of a unified system for all registration purposes.2 In addition to doing away with the urban/rural designation, Document No. 25 declared small urban areas “fully open” to hukou transfer, introduced a policy of gradual relaxation for hukou transfer in medium-sized cities, and formalized rule-based eligibility criteria for large cities and megacities, where hukou conversion would be based on conditions such as stable employment, housing, and social insurance contributions.

It also began the crucial task of decoupling the provision of public services from hukou location, tying access to public services to place of residence rather than hukou status. The resident permit (居住证) became the key delivery mechanism, which was solidified with State Council Executive Order 663 in 2015. For many cities, if citizens could demonstrate a certain period of continuous residence and contributions to the local social insurance system, they could get a resident permit and access basic services locally. This replaced the old local/non-local binary with a system of threshold-based inclusion.

Hukou Transfer Relaxation

This relaxation of hukou transfer policies arrived roughly around the same time (2010-2015) as the wave of Chinese modernization and development finally began extending to cities in inland regions that had previously been mocked as undesirable backwaters. I do not think this timing was a coincidence. Opening the figurative floodgates to domestic cross-migration runs less of a risk of straining limited urban resources across a small handful of megacities if broad growth has succeeded in creating new, attractive destinations elsewhere across the country. Shanghai faces less pressure from Anhui migration if cities like Hefei or Wuhu already offer viable, lower-cost urban alternatives.3

Following the State Council’s 2014 Opinions document, the old barriers to hukou conversion started coming down through the rest of the decade. Many small and medium-sized cities immediately opened up unrestricted conversion to a local hukou, while larger cities established transparent entry rules or points-based systems for conversion eligibility. By the end of 2014, every city in Sichuan and Guizhou except for their capitals (Chengdu and Guiyang, respectively) had already effectively opened local hukou conversion. Over the subsequent years, many more cities quietly removed remaining requirements, such as social insurance thresholds or residence duration. By the late 2010s, conversion in much of the country’s smaller cities was already largely a procedural affair. The first large city of note to announce an explicitly “zero-threshold” （零门槛）approach was probably Shijiazhuang (capital of Hebei) circa 2019, which made it the earliest provincial capital to remove all meaningful barriers. Other provincial capitals, including Nanchang, Kunming, Jinan, and Fuzhou, followed rapidly in the 2019–2021 timeframe.

By the end of 2024, a study based on data from 332 cities found that the average “hukou conversion threshold” across the country had fallen to just 12.6%, implying that roughly 85-90% of migrant workers qualified for conversion to a local hukou according to the requirements of their host city. The same study showed that more than 90% of the cities surveyed were now classified as “low barrier” or “no barrier” cities, with just nine cities nationwide still maintaining relatively high thresholds. The nine “high barrier” cities saw hukou thresholds >50%, with four of them having very high thresholds of >85%.4

Despite these reduced barriers, there remains a substantial gap between the share of the Chinese population living in an urban location (i.e., the urbanization rate) which in 2024 was ~67% in according to the National Bureau of Statistics, and the share of the population with a hukou registration in an urban location, which was just ~50% according to the Ministry of Public Security. This gap amounts to 17% of the population, or nearly 240 million people. Part of the gap can be explained by migrant workers in those 9 cities that still don’t qualify, or who live in other cities but don’t yet meet the requirements, but they can’t account for all of it.5 So why are there seemingly so many Chinese citizens choosing to work in an urban location for which they appear to qualify for hukou conversion, but not pursuing it?

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Cross-Provincial Education and Healthcare Access

Part of the answer to that question can be found in the policy changes to how public services are accessed in China. In addition to hukou conversion, the last decade has seen major reforms to how citizens access public services like schooling and healthcare. In 2016, State Council Document No. 40 began requiring migrant children’s compulsory education be handled primarily by destination governments, financed through local planning and budgets, and operationalised through residence permits rather than hukou conversion. By 2020, the Ministry of Education said that there were 14.3 million accompanying children of migrant workers in compulsory education in that year, and 86% were enrolled in public schools or government-purchased seats.

Barriers still exist in the largest cities, however, and enrolment access policies are particularly uneven in downtown areas of the largest cities, which typically also have the most competitive schools. Some recent studies have also noted that even when municipal policies are explicit, implementation at the district level may still lag. So, while access to education is now guaranteed in principle for the children of migrant workers, without owning a local property in their target school district, they may be forced to enrol in a less desirable school in the suburbs. At this point though, it’s no longer a uniquely hukou issue, as such scenarios are broadly comparable to school enrolment policies in other countries like the U.S.

Healthcare has followed a trajectory similar to education, but through different institutional channels. China has various public health insurance schemes for both urban and rural residents, but access to treatment, much like education, was originally tied to the place of hukou registration. Using healthcare services in another location would necessitate out-of-pocket payment and a tedious administrative process to secure reimbursement in the home province. Additionally, while inpatient services were almost always covered, certain types of medical treatments (e.g., for chronic diseases) were basically ineligible for cross-province coverage.

However, as early as the major reforms of 2009, China began progressively dismantling the healthcare access barriers faced by migrants and enhancing the portability of medical insurance across different regions. Most critically, this included a cross-provincial direct settlement system, which was piloted through the middle of the 2010s, in parallel with the rollout of the hukou conversion and education reforms. By 2021, this underlying system was largely in place, but usage rates were still weak, with even the most mature treatment category – inpatient treatment – using direct settlement less than 60% of the time, according to the public WeChat account of China Health Insurance Magazine.

2021 also appears to have been a tipping point, after which usage of the direct settlement system increased rapidly. By 2024, official statistics from China’s National Healthcare Security Administration showed cross‑provincial direct settlement systems in that year handled over 238 million healthcare cases, rising almost 85% year-over-year. Their data showed cross-provincial settlements reduced out-of-pocket payments by nearly RMB 200 billion and were now operating across a nationwide network of more than 640,000 medical institutions. Furthermore, because insurance enrolment itself had already shifted in most places from hukou‑based eligibility to residence‑based participation, migrants were generally able to access care and settle costs at the point of treatment at a level never enjoyed before.

If Access to Public Services is Guaranteed, What’s the Point of Converting?

This is a fair question. After all, if your Anhui village hukou is no longer a barrier to receiving direct settlement of healthcare services in Shanghai, and your kids can attend Shanghai schools, what’s the benefit of switching to a Shanghai hukou? Switching into a better pension plan, but at the expense of losing your land? Once you deregister your home village hukou, you’re also at risk for your household to be unenrolled from the village land collective registry, sacrificing your precious (and unique!) land usage rights.

I’ve increasingly heard this in interviews with migrant workers in places like Shanghai, Hangzhou, or Wuxi, finding out they have no interest in converting to a local hukou – prioritizing the retirement optionality and the residual incomes that accrue from holding onto their rural land over the increasingly meager incremental benefits of changing to a local hukou.

A Shanghai citizen might even be tempted to ask whether they’re getting the short end of the stick these days. After all, the migrants who still hold hukou in their hometown while working in the city get to have their cake and eat it too, enjoying the benefits of collective land-usage rights AND access to top-quality urban public services. Urban residents are, of course, welcome to convert their hukou to a rural location somewhere, but this won’t grant them collective land-use rights.

With Hukou Reforming, What Is Left to Criticize?

In the process of these reforms, a familiar line of criticism has lost much of its bite, though not necessarily its audience. The hukou system has long served as a go-to example for commentators seeking to illustrate China’s structural inequities and authoritarian policymaking, often characterized as a rigid mechanism that traps migrants outside the benefits of urban life.

That framing is now increasingly out of date. As barriers to service access have weakened and migration has become far more flexible, the reality on the ground has grown more complex, and less supportive to simple narratives of exclusion and state control. Unfortunately, some commentary continues to lean on this older, caricaturized depiction, or even seeks out rationales for why the reforms themselves are actually signals of enhanced state control.

For instance, this 2022 paper published in China Quarterly suggested the reforms to the hukou “serve as a political contrivance for the survival of the Chinese party-state regime”, and proposed that the resulting system under the new reforms would be “an even stronger barrier”. Such commentary rarely reflects the reality of how the reforms have actually been implemented, and the persistence of the critiques says as much about the incentives of the commentators as it does about the system itself.

Where Do We Go Now?

There’s still a good distance between where we are now, and the “complete abolishment” of the hukou system (and that’s not to say that’s necessarily where Beijing is intending to go). China’s largest cities are still not fully convertible, and it’s not clear that they ever will be. Meanwhile, the readouts from the NHSA stop short of claiming “complete resolution” of access issues for migrant workers, implying there are still areas of uneven implementation. While concerns over some public resources are easing due to shrinking demand (children’s education, for example), other types of public resources are only going to be under more strain into the future (healthcare and eldercare) and cities will surely want to keep those most scarce resources available for local citizens.

In other words, what remains of the hukou system is less about restricting movement, and more about managing fiscal obligations. The most important question has evolved from “can migrants come and live here?” to “who pays for the long-term costs of social services?” That is a much more familiar question internationally. Whether you look at school district zoning in the U.S., residency requirements for social benefits in Europe, or local government financing constraints almost anywhere, the underlying issue is the same: public services are funded locally, and access for non-locals always entails some friction.

China is converging toward that global norm, albeit from a very different starting point and through a more administratively led system. The resident permit policies, points systems in top-tier cities, and the continued existence of local hukou thresholds are all techniques to help smooth that transition instead of eliminating it outright.

The more interesting question going forward is not whether hukou disappears, but whether the remaining distinctions between hukou in different regions, especially when it comes to pensions, fiscal transfers, and collective land use rights, can be resolved into a system understood as a set of trade-offs, instead of a barrier. It’s clear that the marginal benefits of converting continue to shrink in most of the country. As more migrants choose to retain their original registration location, the system will evolve too, into something that looks less like a rigid hierarchy, and more like a menu of different lifestyle choices. Whether external commentary keeps pace with that shift remains to be seen.

The Lululemon marketing named the event “擂响中华大鼓” — beating the Chinese Great Drum — and framed it as a tribute to Chinese cultural heritage.

The footage quickly rolled out across social media. Everything looked on-brand. But soon enough, netizens are starting to ask the question:

“Was that actually a Japanese taiko?”

Within hours, the Chinese internet had an answer.

The resemblance was not subtle. Many netizens cited evidence—such as the fact that traditional Chinese drums are short and squat, with drum skins nailed directly to the frame with metal tacks. By contrast, the drum in Lululemon’s Great Wall event was taller and narrow-barreled, its skin lashed tight with a web of crisscrossed red ropes, which are unmistakable signatures of a Japanese Taiko.

The observation was later publicly confirmed by Zhang Yong, a national-level inheritor of Jinnan Weifeng Luogu (a type of Chinese drum and gong music) intangible cultural heritage, who claimed that the drum used in the event was a Shimetaiko. This confirmation left netizens furious, causing a campaign to boycott Lululemon to spread virally within days across Chinese social media.

Some may simply attribute this to anger over foreign brands’ cultural appropriation, or to the anti-Japanese sentiment that has been developing among the general public in recent years. But there is much more to it.

By June 16, Lululemon had apologized, deleted all promotional materials, and pulled its most ambitious China campaign of the year.

In today’s newsletter, I want to move past the cliché of how this is a complete marketing disaster (which is a given) and discuss how this event reveals much more nuanced changes in Chinese cultural identity.

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Was that actually a Japanese taiko?

Frankly speaking, I think it’s a blurry line. There is a reason a drum can cross cultural borders unnoticed by the untrained eye: East Asia is not a collection of hermetically sealed containers. For over 1,500 years, goods, scripts, instruments, and aesthetics have flowed across the China-Japan-Korea arc so thoroughly that many daily cultural markers are shared property.

Japanese taiko originated from Chinese drums brought over during the Sui and Tang dynasties, just as Kanji stems from Chinese characters, and the tea ceremony traces back to Song-dynasty diancha.

凡響HiiKO, the drum troupe recruited to perform at the Great Wall, also tried to fight back from that angle. They claimed the instrument was a “reproduction of a Tang Dynasty jiegu“ (唐代羯鼓复刻) — a historical Chinese drum that is indeed the distant ancestor of the Japanese taiko [*].

(You can try to judge the differences yourself. Left is a Tang Dynasty Jiegu, and right a Japanese Shimetaiko.)

What does this drum mirror about a changing Chinese national identity?

Here is where the story turns.

The drum troupe at the center of the scandal, 凡響HiiKO, was founded by Ye Songyuan, who has specialized in Japanese taiko since 2000. Even the name “HiiKO” derives from the combination of the Japanese word hibiki (響), which stands for “sound”, and Taiko.

For most of its existence, the troupe openly marketed itself as a Japanese taiko ensemble. However, after 2024, they suddenly rebranded as “Chinese Great Drums,” “Guochao” (国潮, “China Chic”), and “Intangible Cultural Heritage Inheritors.

A veteran with over 20 years of taiko experience obviously knows the difference between a Chinese drum and a Japanese one. But to secure lucrative commercial contracts, choosing between the two was merely a marketing decision.

Surprisingly, this transformation went unnoticed for years. The troupe collaborated with major brands, performed at high-profile cultural events, and even appeared on CCTV (China’s central television) under their new guochao identity. No one called them out—not state media producers, not event organizers, and not the audiences. Even the explicitly Japanese name “HiiKO” never raised an eyebrow, and they enjoyed smooth, unquestioned approval.

What’s different this time around?

Why did Chinese netizens, in a matter of hours, catch something that professional television producers, brand marketing teams, and event agencies — presumably staffed with culturally-literate people — had all missed, sometimes repeatedly, for years?

What the disastrous marketing campaign reveals is not just a question about Lululemon. It is a question about the changing cultural identity of Chinese citizens.

China’s “cultural authority” is getting decentralized

For most of modern Chinese history, the question “What counts as authentically Chinese?” was answered by institutions: the state cultural apparatus, academia, museums, and the heritage establishment. The Great Wall drum incident reveals how much this has changed.

The people who initially caught this were not angry nationalists or institutional “experts.” They were percussion professionals, music students, instrument hobbyists, and historically literate netizens. These “folk archaeologists” conducted what amounts to a crowd-sourced, rigorous peer review—in real time on social media. They did so by citing Tang Dynasty court music records, analyzing drum rope-tensioning techniques, and comparing the instruments to museum catalogs.

What’s really interesting to me is not that Chinese netizens are criticizing brands, but that their criticism is becoming professional. This was rarely heard of ten years ago. Back then, when a foreign brand blundered, the public response usually followed an emotional and reactive pattern: cries of “insulting China,” boycotts, and demands to “get out of China.”

Today, netizens can and want to debate the hourglass waist of a jiegu drum, the mechanical principles of traditional rope-tensioning, and the specific instrumentation of Tang Dynasty court banquet music.

A massive, highly knowledgeable class of “cultural consumers” is emerging, and their standards for vetting cultural claims can often be higher than those of a brand’s internal consultants. For brands, this poses a massive challenge. The marketing era of “It’s Chinese culture because we say it is” is dead. Today, your work must withstand an audit by public experts.

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The “Guochao” trend has fostered a highly discerning consumer bracket.

As we noted as early as 2023, the rise of “China Chic” (Guochao) has carved out a distinct market segment, fueling the success of many domestic brands that feature cultural elements, such as Songmont, Laopu Gold, Tong Shifu, etc.

However, buzzwords like 非遗 (intangible cultural heritage), heritage inheritors, and Guochao have suffered severe inflation over the past years. Too many individuals have co-opted these labels, and too many commercial projects have exploited the banner of “inheriting Chinese culture” for pure profit. As a result, the public is becoming immune to this marketing jargon.

But at the same time, more Chinese are developing a genuine interest in reclaiming and studying China’s cultural roots, rather than simply paying for a superficial “vibe” manufactured by brands.

That level of cultural scrutiny simply was not a priority for most Chinese consumers ten or twenty years ago. I often describe what I’m seeing as the Chinese people’s own Renaissance.

Defining “self” vs. “other”:

Many would argue that anti-Japanese sentiment is the core trigger here, but in reality, Chinese consumers rarely react negatively to Japanese brands solely based on their origin. Even during recent periods of tense Chinese-Japanese relations and government-imposed travel restrictions, commercial pragmatism is eclipsing raw nationalism: Sushiro’s new stores still saw long queues, and vacations in Japan are trending.

What is truly becoming central is a growing need among the Chinese for clearly defined cultural boundaries and identity.

Across 1,500 years of cultural exchange between China and Japan, the boundaries of many cultural symbols have naturally blurred. In daily life, the average person historically had no practical need—nor any desire—to obsess over whether a specific tradition was definitively Chinese or Japanese. Today, however, drawing this line has become increasingly important: what belongs to China belongs to China, and what belongs to others belongs to others—even if they share a common historical root.

Simultaneously, a more intellectual and nuanced form of grassroots cultural engagement is rising. It does not aim to boycott, but to correct. A decade ago, one might have witnessed people mindlessly smashing Japanese cars in protest; today, that purely emotional, irrational response has largely receded. The demand is no longer for foreign brands to “get out of the Chinese market,” but for them to be accurate and accountable for their cultural claims.

At a deeper level, this reflects identity construction in an era where China is going global. As China integrates more deeply into the global system, her people are craving clearer, more distinct boundaries for their own identity.

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🔐 Baiguan pro exclusive: investment implications for Lululemon

This is not the first public relations crisis Lululemon has faced in the Chinese market. Just this past April, Lululemon’s use of PFAS materials—often called “forever chemicals” and linked to cancer and endocrine disruption—had already impacted sales in China, according to observations by our parent company BigOne Lab.

Lululemon was counting on a comeback during the 618 shopping festival window, China’s largest e-commerce sales event in mid-June, but the drum scandal hit right at this critical moment.

In the Baiguan Pro tier we launched this April, we share monthly updates of data points that are crucial to understanding the equity investment scene in China. We have been regularly updating the sportswear sector sales trends in China, including Lululemon’s sales, in our monthly “Data Update” series.

We are now offering a free upgrade to all paid subscribers to the Baiguan Pro tier until the end of July. If you enjoy our content and like deep dives directly related to equity investment, I recommend that you get an annual subscription (~$188, then email us for an upgrade,) which effectively gives you the Baiguan Pro subscription (priced at $365) for the full year.

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Two years later, the bet looks less like Silicon Valley optimism and more like a prophecy already being fulfilled. Matthew Gallagher (and his brother) launched Medvi, a telehealth startup, from his Los Angeles home with $20,000 and no employees, using over a dozen AI tools. In its first full year, Medvi posted $401 million in sales and a 16.2% net profit margin [*]— nearly three times the margin of Hims & Hers, which ran the same business with 2,400 people.

The one-person company (OPC) — a single founder wielding AI as a force multiplier — has gone from thought experiment to a real entrepreneurship path. And now, this concept that first originated in the US has landed with significant cultural and economic force in China.

7.3 million new one-person companies in China

By the end of 2025, nearly 7.32 million OPCs were newly registered in China, surging 42.3% year on year [*]. By mid-2025, China had registered 16 million one-person limited liability companies (一人有限责任公司), representing a quarter of all newly registered market entities nationwide [*].

With numbers like these, local governments began racing to compete for solo founder talent and build dedicated communities.

Beijing made Zhongguancun Science Park the centerpiece of its OPC push, anchoring the initiative around a ¥2 million innovation subsidy for qualifying solo founders, alongside reduced registered capital requirements and priority access to incubator space. Shanghai’s Lingang New Area went further, launching what it calls the “Super Individual 288” policy — a comprehensive package of 288 specific support measures covering tax rebates, co-working allowances, and visa fast-tracks for foreign founders.

Across virtually all cities with OPC-specific policies, AI infrastructure is the most consistently subsidized element. Chongqing, Qingdao, and Shanghai’s Pudong district have all introduced “computing vouchers,“ with Pudong offering to cover computing costs of up to 300,000 yuan ($44,000) for OPCs [*]. Shenzhen released an action plan to build more than 10 OPC communities of over 10,000 square meters each by 2027, pledging to cultivate more than 1,000 high-growth AI startups in the process [*].

This is not a first-tier-city-only phenomenon. In November 2025, Suzhou — a manufacturing and tech hub in the Yangtze River Delta — announced it was reinventing itself as a destination for AI solopreneurs, pledging to build 30 OPC communities and cultivate 1,000 one-person enterprises by 2028 [*].

Hangzhou has perhaps been the most aggressive of all, having announced an OPC-specific subsidy totaling ¥1 billion. Zhejiang province also introduced a personal bankruptcy insurance product specifically for OPC founders — a genuinely novel instrument designed to address one of the structural fears that have historically kept Chinese entrepreneurs cautious.

By April 2026, more than 20 cities had issued OPC-specific policies.

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What are they actually building?

According to the landmark 2026 OPC Insight Report released by Honghub (China’s first dedicated OPC accelerator in Hangzhou), the developer-dominated era is over. 75% of solo founders in China now come from non-technical backgrounds (marketing, product, or traditional industries). AI code generation has completely flipped the script: for every $1 spent on AI tooling, the equivalent human developer labor now costs roughly $72.

From my observation, many solo founders and indie developers are incredibly pragmatic. Most aren’t pitching moonshot ideas to VCs or chasing the “one-person unicorn” narrative (partly because China’s primary venture capital market is far tighter and less speculative than its US counterpart.) Instead, they focus on low-profile, sometimes even “boring” businesses that nevertheless generate good cash flow.

For instance, a massive wave of OPCs has emerged in the AI-generated short drama sector, where solopreneurs use LLMs for scriptwriting and AI video tools to churn out highly commercialized content for global and domestic audiences. Content creation, boutique consulting, online education, and cross-border e-commerce marketing have become the standard playbooks for Chinese OPCs.

What’s unique about China’s OPCs

But there are also more ambitious projects. “AI + Supply Chain” OPCs are emerging as China’s true competitive differentiator. By pairing AI-driven productivity with a physical proximity to manufacturing that cannot be replicated elsewhere, Chinese founders are launching and iterating products at unprecedented speeds—and many are targeting overseas markets from Day 1.

Take Zhang Lei, a recent Shenzhen University graduate based in Shenzhen’s Bao’an district. Working entirely alone, he used AI to design and build an AI smartwatch. He went from initial concept to a physical, working prototype in just 45 days, secured three investment letters of intent within three months, and cut traditional startup costs by 80%. The Bao’an Dagongfang AI Hardware OPC Hub where Zhang is based, has become the poster child for Shenzhen’s new “one-hour AI hardware production circle.“:

Shenzhen’s ‘OPC communities’ have formed a collaborative network where ‘the next floor down is the next step in the supply chain.’ An AI hardware entrepreneur can easily find an e-commerce company within the same building to help sell their product, while an AIGC creator can partner with a resident content IP studio for marketing. This ‘small yet dense’ ecosystem allows one-person companies to instantly plug into resources and rapidly scale from 1 to 100. [sohu]

The new Huaqiangbei: from copycats to 0-1 innovation

For decades, Shenzhen’s famous Huaqiangbei electronics market was known as a massive wholesale hub for cheap components and unbranded copycats. Historically, it was globally notorious for its hyper-efficient shanzhai (copycat) culture, where entrepreneurs could tear down a brand-new iPhone and have a functional, unbranded knockoff selling on the streets within a week. But today, Huaqiangbei is betting on the OPC movement and AI to revive.

In Shenzhen, OPC founders are launching highly innovative products, ranging from automated medical record systems that have been adopted by major hospitals to popular consumer products like ‘AI + pet’ solutions. Armed with the productivity boost of AI, solo founders can now thrive in small, vertical niches that often require highly customized solutions—markets that large enterprises simply don’t have the agility or capacity to drill into.

In a way, it functions much like the classic e-commerce ‘drop-shipping’ model, but with a massive upgrade: instead of just trading existing goods, solopreneurs can now drive genuine 0-1 product innovation with a small team and a laptop.

By leveraging the industrial proximity, integrated design support, and ultra-fast manufacturing networks perfected over the last thirty years, today’s solo innovators aren’t churning out knockoffs. They are using the exact same ecosystem that once built the world’s electronics to turn highly sophisticated, original concepts into mass-produced global products at lightning speed.

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The OPCs in rural China

China’s story is, characteristically, more layered. It’s not just builders with laptops and API keys in the tech hub like Shenzhen or Silicon Valley. It’s also recently laid-off engineers from ByteDance and Alibaba who have nowhere else to go. It’s a 28-year-old in Yiwu who figured out that AI can write product listings in 36 languages. It’s a woman in Beijing whose editorial consulting practice runs entirely from her phone. And it’s increasingly happening far outside first-tier cities; it’s showing up in villages too.

Li Xu, a 27-year-old social media worker from Hefei, visited Laotian Village at the foot of Anhui’s Jiuhua Mountain on vacation in 2025 and never left. He set up “Fucun Laotian,” a rural livestream operation filming local culture, food, and scenery for urban audiences seeking authentic countryside experiences. The village has since attracted more than 20 digital nomads like him and incubated over 10 startup projects — many of them are OPCs.

The productivity boost gave rural China an alternative, and young founders a way to afford their passion with significantly lower costs compared to high-pressure hubs like Beijing or Shanghai.

Building a company, or just surviving?

But let’s talk about the elephant in the room. Anyone following China’s economy over the past few years has likely heard about the bruising labor market, especially for young college graduates.

According to official data, more than 200 million people in China are now engaged in what the government calls “flexible employment.” That means roughly one in four workers is part of the gig economy. This raises an uncomfortable question: Is the surge in Chinese OPCs a genuine entrepreneurial revolution, or is it just unemployment in disguise?

Walk through Beijing’s commercial districts on a Tuesday morning, and something will strike you: the cafés are packed. Not with retirees or tourists, but with people in their 20s and 30s—laptops open, headphones on, intensely focused.

For the young Chinese freelancer or solo founder, the café-as-office has become normalized in a way that would have seemed alien even a decade ago. But this is the visible face of China’s new freelance and digital nomad culture, a cohort that doesn’t neatly fit into traditional categories of “employed” or “unemployed.”

Some are true OPC founders. Some are freelancers serving domestic or international clients. Some are building side projects alongside part-time gigs. And some, frankly, are just trying to figure it out. I cannot help but wonder: how many of these people are genuinely building sustainable, independent careers, and how many are simply struggling to stay afloat? Starting a profitable business is inherently risky and not a path that fits everyone’s skill set.

The OPC wave in China feels both new and familiar.

On Chinese social media, netizens often cut through the hype with blunt sarcasm: “Stop using fancy acronyms. OPC founders are just 个体户 Getihu.”

The term Getihu has no perfect English translation. “Individual business owner” is functional, but it misses the historical weight. In China’s cultural memory, the Getihu were the street vendors who first dared to sell merchandise in the late 1980s as Deng Xiaoping began loosening the centrally planned economy. They were the earliest entrepreneurs of the Reform Era, symbols of opening up, selling food, clothing, and household goods from makeshift stalls.

Yet, for a long time, calling someone a Getihu was far from a compliment. It carried a certain distinct social stigma. To be a Getihu implied that you were doing unstable, low-status manual work because you couldn’t land a “real” job—meaning a secure position in a state-owned enterprise, a government office, or a big multinational corporation. Decades later, the freelancers and OPC founders sitting in cafés on workday morning face a remarkably similar societal skepticism.

Is China’s OPC wave a genuine entrepreneurial revolution, or an elaborate coping mechanism for a labor market under stress?

The long shadow of the small business founder

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In Today’s Data Update

We are updating five sectors with BigOne Lab’s proprietary data as of May 2026 — including a first look at the 618 shopping festival pre-period:

• Laopu Gold (6181 HK) & gold jewelry: In April, we flagged the May promotional ramp as the key swing factor to watch amid Laopu’s April weakness. Laopu has corrected more than 40% from the peak in January. Could the promotion move the needle? And what’s the overall trend for the broader gold jewelry amid a weak gold price? We will share Laopu’s May sales trend and what’s happening on the secondary market.

• Luxury goods: The brand-level divergence we flagged in April has sharpened further in May. A handful of names are showing genuine improvement — including some that have been long-struggling. We also share how core European megabrands perform in today’s issue.

• POP MART (9992 HK): The month’s biggest talking point was the POP MART × McDonald’s collaboration — 400,000 units of Twinkle Twinkle mystery boxes were sold out in 15 minutes and triggered some of the most viral discussions we have seen since LABUBU’s global moment last year. We will share what this did (and did not do) to the monthly sales trajectory.

• Sportswear & footwear: After April’s broad-based recovery in online data, May brings a fresh read on offline store performance across brands, including Anta, Lululemon, and Nike, providing a useful ahead-of-earnings preview.

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

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1. Laopu Gold & Gold Jewelry

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The original article was written in Chinese by Elsewhere别处发生, a writer and podcaster who typically reports on China’s venture capital and startups. It’s a partial translation that leaves out some details unrelated to DeepSeek.

The translation below is not authorized by the original author. Emphasis is our own.

The “four-hour meeting”

First, let’s talk about that investor meeting—the one whispered about as the “four-hour meeting.”

In mid-May, DeepSeek hosted this virtual meeting via Tencent Meeting. By then, the list of investors was mostly settled. Each firm was allowed to send two attendees to the meeting. The session began with a presentation by Liang Wenfeng, followed by a Q&A where he addressed the investors’ inquiries.

Legend has it that one CVC (Corporate Venture Capital) investor spent a full ten minutes just asking questions—starting with a lengthy self-introduction followed by three drawn-out questions. The atmosphere in the virtual room turned awkward for a moment. It’s easy to imagine the scene, with some participants whispering to one another, wondering who this person was.

Liang, however, seemed unfazed and continued to answer every question earnestly. At one point, after finishing the second question, he forgot what the third one was and had the investor repeat it.

For many of those present, even those who had already committed capital, this was their actual first interaction with Liang Wenfeng, as most had never met him in person. By the end of the call, many were left with a lasting impression, as if his words were still echoing in their minds.

Liang Wenfeng’s aphorisms and spirit began to circulate throughout the market.

Restraint and AGI

Liang Wenfeng is not a naturally gifted orator, and he speaks at a measured pace. Yet, several quotes from that meeting are frequently repeated (paraphrased, as the exact wording may vary slightly):

• “We have no fame and no influence; we are just a group of very ordinary people.”

• “The narrative I like is a group of ordinary people achieving something extraordinary. For DeepSeek, our core focus is ensuring team stability, which is more important than money or resources. It is the greatest risk and the greatest challenge.”

• “Assuming AGI will account for 20% of GDP, those who want 5% will lose to those who want 1%; those who want 1% will lose to those who want 0.1%.”

• “What we want to do is anything related to improving intelligence; we will not do anything else.”

• “AGI is a big enough endeavor. Everything else is just a process.”

Throughout those four hours, Liang consistently emphasized the same themes: the singular pursuit of AGI, the philosophy that “less is more,” and the importance of restraint.

From 5 Billion to 1.5 Billion

Official fundraising began around April of this year. It is said there was a “whitelisting” of funds—a list consisting of institutions with significant capital capacity and strong brand reputations.

Initially, DeepSeek required a minimum investment of 5 billion RMB, prohibited the syndication of shares, and insisted on a “pure” RMB fund structure. Given this, one prominent investor who was widely rumored to be a guaranteed participant ultimately did not join. Industry rumors suggest this was because they had tried to sell portions of their stake to Middle Eastern LPs.

However, in China, there are very few market-oriented funds capable of committing 3 billion RMB in a single shot. Consequently, many VCs negotiated to see if they could participate through multiple fund entities.

Ultimately, the minimum investment threshold was lowered to 1.5 billion RMB, and the fundraising structure became more flexible.

There was also a claim that participating institutions were preferred if they had not invested in other LLM companies. This was, in all likelihood, an impossibility for a simple reason: finding a top-tier fund that hasn’t invested in any LLM companies is a contradiction in terms.

During the investor meeting, Liang Wenfeng also expressed that DeepSeek is willing to help other companies, including other large-model developers. The caveat, of course, remains: as long as they don’t try to poach his talent.

[Some parts about participating venture capital funds are redacted. You read about them in the original article.]

The most important demand: don’t poach DeepSeek’s people.

I won’t go into DeepSeek’s investment terms here. I’ll add only one point: whether dealing with big tech companies or VC funds, Liang Wenfeng’s most important demand was this: do not poach DeepSeek’s people, or encourage them to leave and start their own companies.

“China’s largest listed company“

If the issue is reduced to the level of a single investment, what kind of company is DeepSeek, in terms of odds of success?

One investor who participated in the deal once worried, perhaps unnecessarily, whether this might be an investment with too much consensus behind it. According to the experience of the investment industry, consensus investments usually do not end well.

But with DeepSeek, it is hard to say that. Or rather, we cannot understand it through a simple investment lens, whether in terms of its significance for China’s AGI industry or on a more spiritual level.

As one investor put it: “They are doing all of this with enormous goodwill. He seems to be telling us: the world was always supposed to be this way.”

So some hesitated, while others believed there was “no reason at all not to invest.” If, as some expect, DeepSeek eventually goes public, could it become the largest listed company in China’s A-share market?

Low profile and ambition

In following DeepSeek’s fundraising progress, one feeling stood out: for most people, DeepSeek was probably an utterly unexpected answer. Even the investors who most love to win had not imagined that one day it would open itself up to financing.

So, as mentioned earlier, many of the well-known investment heavyweights only recently managed to get in touch with the company. Of course, Liang Wenfeng had long avoided meeting investors. After news of the fundraising emerged, many institutions did not even try to compete for an investment opportunity.

But judging from the outcome, some secured a ticket through so-called synergy, some through persuasion, some through branding, and some simply through persistence.

Elsewhere once tried asking several investors about the deal. Most did not want to say much. The sensitivity of the transaction was only one reason. More than that, there seemed to be a kind of self-conscious restraint: because they felt honored to be part of it, they wanted to preserve its low-key nature.

One participating investor said that throughout the transaction process, he kept every document carefully, hoping that one day he might have the chance to frame them.

Another investor repeated twice the 16-character line released with the preview version of DeepSeek V4:

“Unmoved by praise, unafraid of slander, follow the Way, and uprightly correct oneself. 不诱于誉，不恐于诽，率道而行，端然正己。”

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China’s tech indices are outperforming many peers, including the Nasdaq 100, led by AI-infrastructure enthusiasm and the Chinese hardware supply-chain companies with real positions in the global AI buildout. From early 2025 to early June 2026, the STAR & ChiNext 50 rose about 138%, far ahead of the Nasdaq 100’s 46%, making it one of the clearest public-market expressions of China’s new technology cohort. This is not a broad-market story, and most offshore-listed internet giants familiar to global investors have been left out of the rally.

That may sound counterintuitive after years of drawdown and weak global confidence. But China’s core technology assets have quietly become some of the world’s strongest performers. The STAR & ChiNext 50 index tracks leading companies across Shanghai’s STAR Market and Shenzhen’s ChiNext board, and it has become the cleanest listed proxy for this shift.

Adding a broad A-share proxy makes the dispersion visible: the AI-infrastructure-heavy STAR & ChiNext 50 has led dramatically, while the broad China market has lagged far behind the AI basket.

Part of this is base effect after a long bear market that lasted until the September 24, 2024 policy pivot. But the deeper point is that China now has a large, liquid, investable universe exposed to AI infrastructure. That has begun to draw global attention. ProShares has recently filed for 2x leveraged products tied to some of the most representative A-share AI-infrastructure names, including Zhongji Innolight and Eoptolink. These companies may still be unfamiliar to many non-China investors, but inside China they have become market celebrities, closer in recognition to what SK Hynix represents in Korea’s AI supply-chain trade.

For many overseas investors, China tech still means Alibaba, Tencent, Baidu, Meituan, JD.com, and a few other offshore internet companies. That lens is increasingly stale. The listed offshore internet giants are, in many ways, AI laggards: their revenue structures remain heavily exposed to weak domestic consumption, large-company bureaucracy has slowed AI execution, and the most aggressive Chinese hyperscaler, ByteDance, is still private. (More articles will be coming on how domestic investors view the star names of Alibaba and Tencent.)

This creates a perception gap. Most foreign investors still look at the familiar ADR basket and see uneven AI monetization. Domestic A-share investors are looking instead at upstream hardware, semiconductor localization, optical modules, PCB, MLCC, power infrastructure, and other supply-chain chokepoints.

At the center of that spotlight is the STAR & ChiNext 50. The index selects leading companies from Shanghai’s STAR Market and Shenzhen’s ChiNext board, two venues designed around China’s innovation economy, growth companies, and strategic emerging industries. It is therefore a useful public-market proxy for China’s listed hard-tech complex: not the whole A-share market, but a concentrated basket of the companies investors are using to express AI-infrastructure and advanced-manufacturing exposure.

The result is also highly uneven. China’s AI-infrastructure leaders have pulled far ahead of the broad A-share market. In that sense, China is developing its own version of technology-weight-led index performance: a concentrated group of large AI beneficiaries is carrying the headline story, even as the broader market remains far less exciting.

Index Anatomy: The real China tech basket is hard-tech, not offshore-listed internet giants

The STAR & ChiNext 50 is now overwhelmingly a hard-tech benchmark rather than an offshore-listed internet proxy, a traditional manufacturing basket, or a green-energy index.

The China-specific Shenwan sector classification makes the structure clear: the two largest AI-related buckets are Semiconductors at 33.56% and Communications Equipment at 31.16%. Together, they account for roughly 65% of the STAR & ChiNext 50, making them the index’s dominant components. They have also performed far better than most other sectors, which is why the benchmark behaves less like a broad manufacturing basket and more like a concentrated AI-infrastructure index.

The more China-specific Shenwan lens makes the structure visible: semiconductors and communications equipment are the two largest AI-relevant buckets.

The second implication is more important for this cycle: many A-share upstream hard-tech companies are not merely meme concept stocks. They are direct beneficiaries of the global AI capex cycle. Optical transceivers and optical-component suppliers sell into the high-speed data-center interconnect chain. AI processor, CPU/DCU, and memory-interface companies sit closer to the compute and server architecture layer. PCB, CCL, power, and cooling suppliers are tied to the physical buildout of AI clusters.

In practical terms, these companies are exposed to the same spending wave driven by Nvidia, global hyperscalers, and the AI-server supply chain. Many Chinese technology companies are not only suppliers to domestic internet platforms; in selected links, they are also direct suppliers, qualified vendors, or first-tier suppliers to global AI leaders. The exact route differs by company, but the economics are linked to the same bottleneck the global AI sector is tackling: moving, processing, powering, and cooling far more data inside AI data centers.

This is why the market-cap expansion has been so dramatic. From the first trading day of 2025 to early June 2026, Zhongji Innolight, a leading supplier of high-speed optical modules for AI data centers, rose from roughly $20 billion to $211 billion in market capitalization, a 10.4-fold increase. Eoptolink, another major optical transceiver supplier for high-speed data-center networks, expanded from roughly $12 billion to $114 billion, a 9.6-fold increase. TFC Communication, a supplier of optical components, subassemblies, and packaging for AI computing centers, moved from roughly $7 billion to $55 billion, a 7.5-fold increase.

On the semiconductor side, Montage Technology, a memory-interface and interconnect-chip supplier leveraged to AI servers, expanded from roughly $11 billion to $47 billion in market capitalization, about a 4.2-fold increase. Cambricon, a domestic AI-accelerator chip company, increased from roughly $40 billion to $126 billion, while Hygon, a domestic CPU/DCU processor supplier for servers and high-performance computing, rose from roughly $48 billion to $98 billion. These are not micro-cap meme stock moves. They are large market-value re-ratings in companies that occupy important positions across the AI infrastructure stack.

The selected optical communications and semiconductor names are now large enough to absorb institutional capital and influence benchmark composition.

In aggregate, these six selected AI-infrastructure leaders now represent roughly $650 billion of market value, or about 3.3% of the full A-share market capitalization based on the June 4, 2026 Tushare daily-basic data and the article’s USD/CNY conversion. The full STAR & ChiNext 50 constituent basket was about $1.8 trillion, or 9.3% of the total A-share market value, meaning these six AI names alone accounted for roughly 36% of the basket. That is already large enough to matter at any benchmark level, and large enough to change how investors experience China technology beta. This is what makes the cycle different from the usual A-share theme pattern: it is not only a thin group of speculative thematic stocks rising sharply from tiny bases, but a rally in large, index-relevant companies.

That makes the structure look closer to the U.S. market’s Mag 7 experience than to old-style A-share theme speculation. The leadership is narrow, the winners are increasingly heavy in the benchmark, and index performance is being pulled by a small number of companies that sit at the center of the AI infrastructure stack. The result is a structural shift in what “China equity beta” can mean: a China benchmark is no longer only banks, liquor, property, and consumer internet. Increasingly, it carries the weight of AI hardware, data-center infrastructure, and semiconductor localization.

But Is There a Bubble? An A-share-Specific Framework

After the sharp rally of the past year and a half, many of these stocks have already moved into demanding valuation territory. Yet this cycle is not a pure meme trade. Many of the leading companies have visible earnings growth, real order momentum, and a credible role in the global AI supply chain. That is why the debate is difficult: investors worry that the bubble may eventually break, but they also recognize that the earnings base is much more solid than in a typical speculative theme.

That tension creates the need for a framework that fits A-shares’ own market character. A simple valuation screen is not enough, because A-share markets often value the highest believable endpoint rather than the current earnings base.

This is especially true for heavyweight leaders: the market does not always wait to re-rate them step by step through quarterly earnings delivery. I call this a ceiling-valuation approach: first ask how high the imagined ceiling is, then ask how much of that ceiling has already been capitalized into today’s market value. Chinese investors rarely hesitate to preempt the future; when the narrative is strong enough, they can buy aggressively and push valuations to extreme levels before the earnings arrive. In other words, they often pursue growth at the cost of certainty. The same logic also helps explain why the offshore ADR internet basket can suffer from lower valuations: many domestic investors no longer believe Alibaba and Tencent have the same explosive growth ceiling.

This is the core mechanism. When a theme becomes dominant, prices do not wait for profit realization. The market discounts the most optimistic version of the future to the present, so high PE multiples can appear before the earnings arrive, because expectations have already moved first. The uncomfortable part is that the later earnings-delivery phase may be the period when the stock derates and digests the old expectation. Even if actual profits beat the old forecast, the share price can still fall if the market’s view of the future ceiling deteriorates.

That brings us to the key question: how far into the AI expectation cycle is A-share today?

Benchmark: The 2021 new-energy peak is the stress line

To measure the current state of A-share AI expectations, we use a deliberately simple benchmark for reference: the peak of China’s 2021 new-energy cycle, meaning the A-share boom in electric vehicles, solar, wind, storage, and related renewable-energy supply chains.

That was the closest and most relevant historical precedent. It was also a dream-driven industrial narrative, with enormous future addressable markets, manufacturing scale, global demand potential, and a group of companies that began to show explosive profit growth. Coincidentally, energy and information are often treated conceptually as two pillars of technological progress. That makes the 2021 new-energy boom and today’s AI-infrastructure cycle somewhat comparable as market narratives.

At the 2021 peak, we ask two questions about a representative basket of new-energy leaders. First, what were analysts expecting these companies to earn two years later, in 2023? Second, if those 2023 earnings expectations were realized, what forward PE did the 2021 market capitalization imply?

These two indicators capture the core of the bubble. The first measures the required earnings leap: how fast profits needed to compound from 2021 to 2023 to reach the expected 2023 profit pool. The second measures valuation stress: even if the optimistic 2023 earnings were achieved, how expensive the stocks were at the 2021 peak.

This is what the market often treats as a ceiling: a future profit and valuation level that feels reachable, but high enough to carry the dream. It is somewhat similar to the terminal value in a DCF, except it avoids the complexity and false precision of choosing a discount rate. The point is to use a simple ceiling valuation that many speculators, especially retail investors, can understand, repeat, and sell to others. What about the future beyond two years? It is full of too much uncertainty. The framework deliberately leaves it aside.

The benchmark numbers were striking: for this representative group of core new-energy companies, the implied earnings CAGR was 46.6%, and the aggregate forward PE multiple at the 2021 peak was 51.4x. In other words, at the top of the new-energy cycle, the market believed leading new-energy companies could compound profits at 46.6% annually, and even if they achieved that profit base, the stocks were still trading at 51.4x forward earnings.

That is an extremely optimistic benchmark. We set that historical peak at 100%, then ask how much of that benchmark today’s AI upstream and related A-share themes have already reached.

A rough U.S. reference helps frame the scale. Today, the large-cap U.S. AI and technology complex still screens below the 2021 new-energy peak on this simple two-factor yardstick. Using the Mag 7 as an aggregate proxy, expected FY2025-FY2026 net-income growth is roughly 31% and FY2026E PE is roughly 28x. That does not mean U.S. tech is cheap, and it does not mean the comparison is one-for-one. It simply shows how extreme the 2021 A-share new-energy peak was. The relevant comparison here is between that historical new-energy peak and the current U.S. large-cap AI/tech setup: the A-share bubble benchmark was a far more aggressive combination of earnings expectations and valuation stress.

The shaded area marks the 2021 peak zone used to anchor the benchmark. Dots show each stock’s 2021 adjusted-close peak.

The new-energy cycle gives a useful warning. In hindsight, the leading new-energy companies actually delivered 2023 net profits that exceeded the expectations embedded at the 2021 peak. Yet the bubble still broke, because the future ceiling fell for the reasons below. This is the key lesson: in an A-share expectation cycle, the ceiling of belief can matter more than earnings delivery itself.

The stocks did not fall after 2021 because the companies failed to earn money. They fell because the expectation ceiling broke. Domestic demand expectations weakened after the disruptions of 2022. The Russia-Ukraine war and the deterioration in China-foreign relations damaged the global-demand narrative, and the new energy’s imagination space had depended heavily on overseas demand. As overseas policymakers grew more worried about China’s overcapacity and export pressure, restrictions on Chinese new-energy exports also became part of the valuation reset. Most importantly, domestic capacity expanded aggressively. Capital flooded into the industry, local governments competed for projects, and supply growth created brutal price competition.

The lesson is uncomfortable but important: profit delivery does not guarantee stock performance if the market has already priced the ceiling. Once investors begin to fear demand impairment, geopolitical blockage, or supply-side overexpansion, a great industry can become a poor stock-market trade.

Where A-share AI sits today

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Is CXMT’s IPO a Black Swan Moment for the DRAM Giants?

The last few months saw a historic rally across the global memory-chip industry. Each of the three largest DRAM producers — Samsung, Micron Technology, and SK hynix (the “Big Three”), surpassed $1 trillion in market value, one after another.

Since 2025, the AI boom has driven a surge in demand for high-performance computing and storage equipment. As a result, global memory-chip companies have seen explosive growth in both earnings and share prices, becoming major beneficiaries of the AI rally.

It’s within this context that Chinese memory-chip maker CXMT comes under the spotlight of the capital market. On May 27, its STAR Market IPO application was officially approved by the Shanghai Stock Exchange. The company plans to raise around 29.5 billion yuan ($4.2 billion), making it potentially the largest IPO in China since 2022. Once listed, it could be valued at more than 2 trillion yuan.

Founded in 2016 and headquartered in Hefei, Anhui Province, CXMT is currently the only Chinese DRAM company to have achieved large-scale mass production. In 2025, it ranked fourth globally, with a market share of 7.67%.

2024-2025 Output of DRAM Memory Chips (thousand wafers per month) Source: TrendForce

DRAM is one of the most concentrated segments in the semiconductor industry and has long been dominated by the Big Three. For latecomers, huge capital expenditure is only the starting point. They also need years of accumulated expertise in process technology, yield improvement, patents, equipment, customer certification, and supply-chain management. The fact that CXMT has joined the big league is itself a major breakthrough for China’s semiconductor industry.

As of 2026, CXMT has completed the mass-production transition from its first- to fourth-generation process platforms, with products covering DDR4, DDR5, LPDDR4X, and LPDDR5/5X. The company has also built 12-inch DRAM wafer fabs in Hefei and Beijing. Its monthly capacity is expected to continue rising, further expanding CXMT’s presence in the global DRAM market.

Here is an overall timeline for CXMT:

• 2016: The CXMT was launched.

• 2017: Construction of the first-phase fab began.

• 2019: CXMT began production of 8Gb DDR4 products using a 19nm process, marking the first time a Chinese company achieved mass-production capability for mainstream DRAM products.

• 2021: The company made further progress with its 17nm process.

• 2023: CXMT launched China’s first domestically developed LPDDR5 product and entered the smartphone supply chains.

• 2024: CXMT achieved mass production of DDR5.

• After 2025: The company continued to advance DDR5, LPDDR5X, and selected server-side products, while HBM-related R&D also began.

The Hefei Model

Behind CXMT’s rise is a broader story: “Hefei Model.” Named after the city that nurtures display maker BOE, electric vehicle NIO, and CXMT, the Hefei Model is a Chinese-style approach to industrial policy. In effect, it functions as a form of state-guided venture capital: local authorities identify industries with long-term strategic value, take equity stakes to fund promising companies, and later sell their shares for massive profits once the companies scale.

In recent years, Hefei has been dubbed “China’s best venture-capital city.” Its state-owned capital does not simply hand out subsidies. Instead, it participates deeply in the development of strategic emerging industries through industrial funds, equity investment, land resources, industrial coordination, and long-term policy support. This approach has helped a once relatively poor provincial capital climb sharply in China’s urban income rankings.

According to CXMT’s prospectus, the company is backed by a broad base of long-term state and private capital, including the second phase of the National Integrated Circuit Industry Investment Fund (Big Fund II), state-owned capital from Anhui Province and Hefei, Alibaba Cloud, financial asset investment companies under state-owned banks, and insurance funds. These investment capitals are:

• patient. DRAM is a capital-intensive, cyclical industry that often requires years of losses before scale and competitiveness emerge. Without long-term capital support, it would be difficult for any company to survive the long process of R&D, capacity ramp-up, and industry downcycles.

• closely aligned with industrial policy. China wants to improve the self-reliance of its semiconductor supply chain, and DRAM is one of the few critical segments still dominated by global oligopolies. CXMT, therefore, has strategic significance.

• helping create an industrial cluster. Memory-chip production is not just about a single fab. It requires wafer manufacturing, equipment and materials, packaging, and testing. Through local state capital and industrial policy, Hefei has embedded CXMT within a broader ecosystem.

This is what makes CXMT different from many other semiconductor startups. Its growth is not driven purely by venture-capital logic. It is a long-term industrial project jointly supported by local governments, national industrial funds, financial institutions, and strategic clients. From this perspective, CXMT’s IPO is not the finish line, but a new capital base for the next phase of capacity expansion and technological catch-up.

Strong Market Demand

That capital base matters because CXMT is attracting attention not because it is simply another “domestic alternative” in China, but because it addresses real market demand. In the consumer DRAM market, its 1a-node DDR5 and LPDDR5X products are beginning to serve a broad range of PC, smartphone, and consumer electronics customers. While CXMT’s process technology still trails the Big Three, its products are already commercially viable for mainstream consumer applications.

At home, CXMT’s memory chips have already been adopted by domestic customers. Its DDR5 products are being supplied to PC makers such as Lenovo, while its server-side products are undergoing validation with internet firms including Tencent and ByteDance. Xiaomi’s use of CXMT’s LPDDR5X chips in high-end smartphones also suggests that domestically produced mobile DRAM is moving beyond low- and mid-range devices and into premium handset supply chains.

This shift toward domestic substitution is not driven solely by government policy or supply-chain security concerns. Instead, it reflects a genuine supply-demand imbalance. As the Big Three allocate more capacity to high-margin HBM (high bandwidth memory) and server DRAM, the supply of consumer DRAM used in PCs and smartphones has tightened. CXMT is well-positioned to fill that gap.

That also helps explain why CXMT’s appearance in global consumer-electronics supply chains. Recently, Corsair’s Vengeance DDR5 16GB memory modules have used DRAM chips from CXMT rather than from the Big Three. This is not an isolated case: HP reportedly placed a large LPDDR5 order with CXMT in January; Qualcomm began working with the company on customized DRAM in April; and Dell, ASUS, and Acer have also reportedly been in contact with CXMT.

When the Big Three are constrained by tight capacity, elevated prices, and longer delivery times, DDR5 and LPDDR5X chips from Chinese suppliers become a practical alternative. In other words, CXMT’s impact on global DRAM market is likely to be felt first in consumer-grade DDR5, LPDDR5X, and other standardized DRAM products.

Is CXMT ready to challenge the Big Three Memory Makers?

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In 2025, Hong Kong roared back to the top of the global leaderboards, hosting 119 IPOs that raised a massive US$37.4 billion, a blistering 231% surge over 2024.

2026 is even hotter. In Q1, HKEX just wrapped up its strongest first quarter in a long while, printing 40 new listings that raised a staggering HK$110 billion, nearly six times the capital raised in Q1 of last year.

The structural drivers are real and should not be dismissed. HKEX’s Chapter 18C framework for specialist technology companies has given AI leaders such as Minimax and Knowledge Atlas a fast track to the capital market. A+H dual-listing momentum is running hot, helping a long line of established A-share giants, from CATL to Montage, find an overseas fundraising platform in Hong Kong. Foreign capital that had been avoiding Chinese equities is dipping back in, looking for a regulated, liquid, internationally accessible entry point. Hong Kong is, structurally, better positioned as a listing venue than it has ever been.

But our memories still beg us to consider this: when the market runs this hot, what does it typically mean for the investors already sitting in the secondary market? Is the IPO boom a celebration of a rising market, or is it the last act before the curtain falls?

Where Does the Money Come From?

The intuition is simple. When a company lists on the Hong Kong Stock Exchange, it issues new shares to the public. The public pays cash. That cash goes to the company (or to selling shareholders). It does not stay in the secondary market.

In other words: a large IPO market is, by definition, a large liquidity extraction machine. Every dollar parked in a subscription form is a dollar not buying Tencent, CNOOC, or Alibaba. Every HKD 100 billion raised in new listings is HKD 100 billion that has, at least temporarily, left the pool of capital competing for existing shares.

Furthermore, behind every single one of those blockbuster IPOs sits a ticking clock. As the standard 6-month and 12-month lockup periods on these multi-billion-dollar tech, AI, and biotech giants begin to lapse over the coming months, a massive wall of secondary paper will suddenly become freely tradable and is about to hit the market.

The counter-argument is that IPO activity reflects investor confidence, which is itself a symptom of a rising market. Busy IPO calendars happen during bull runs, not bear markets. Correlation, if it exists, might run the other way: good markets attract listings, not the reverse.

The data, however, tells a more interesting story. The relationship is not contemporaneous, but forward-looking. Heavy IPO years tend to be followed by weak secondary market performance, sometimes severely weak.

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Baiguan Pro features short and timely commentaries on important market anomalies and events that are worth your attention. Today, our team’s Aaron breaks down this cash-burning and outlines why these cash cows might be intentionally understating their true profitability.

One Micron Can Buy Virtually the Entire Chinese Internet Sector

What’s Behind the Giants’ Bizarre Cash-Burn?

Let’s log this historic milestone: Micron’s market cap now roughly equals Tencent+Alibaba+JD+ Meituan+Pinduoduo + Kuaishou combined.

This year, Chinese internet stocks have been trapped in extreme pessimism. With Q1 earnings wrapped up, market sentiment has hit a freezing point. The contrast over the past month is jarring: US semiconductor stocks are skyrocketing, while US-listed Chinese tech giants continue to plunge.

Michael Burry’s bullish call on Chinese assets about a month ago seems to have been a bit premature.

Capital markets have priced Chinese big tech into complete distortion. The fact that a single memory chip maker like Micron (MU) is worth nearly the entire cohort of China’s digital pioneers is mind-boggling. These are massive commercial empires, yet combined, they equal just one US hardware player.

Today, I’m not here to critique Burry or dissect Q1 prints. Instead, I want to highlight a glaring anomaly

——Chinese tech giants are aggressively burning cash on puzzling initiatives. Their explanations often sound like mere excuses to spend money, yielding zero visible returns.

• US Tech Giants: Capital Expenditures (CapEx) are hitting historic highs, but management presents a clear underlying logic and a visible roadmap for expected ROI.

• Chinese Tech Giants: Their cash-burn feels literal—like setting capital on fire. It vanishes instantly, leaving investors completely in the dark.

If only one company did this, you could blame bad strategy. But when virtually every industry leader does it simultaneously, can we simply write it off as “industry competition”?

In a near-zero-growth sector like e-commerce, the marginal utility of destructive hyper-competition is rock-bottom. Furthermore, there is a clear secular growth driver available—Artificial Intelligence (AI). There is no logical reason to keep cannibalizing each other in legacy businesses.

If a public market investor sitting behind a monitor can figure this out, are we to believe these elite management teams are completely oblivious?

Let’s Look at Some Facts

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Each month, we pair macro data and BigOne Lab’s proprietary indices with a structured, directional read on where Chinese assets stand and what we’re doing about it.

If you haven’t upgraded yet, we’re offering a free upgrade to the Baiguan Pro tier for all existing paid subscribers through the end of Q2. Just reply with the email address associated with your subscription.

Macro & Sentiment Check

Our macro indices suggest that the market has entered a consolidation phase after the strong breakout testing seen earlier in the spring.

1. China Resident Risk Appetite Index (CRRAI)

Following March’s push toward neutral territory (-0.08), the April 2026 CRRAI composite reading recorded a tactical pullback to -0.19. The index remains materially above the late-2025 floor, but April did not confirm a clean break into neutral territory.

The recovery is still visible, but uneven: Capital Market Sentiment (+0.67) and Household Leverage & Credit Dynamics (+0.05) both remained in positive territory. This indicates that retail market psychology and balance-sheet momentum have not collapsed.

The primary weakness stems from the Fundamental Bedrock dimension, which slipped to -0.57. This is the most important constraint because it represents the household sector’s perceived safety margin through property prices, transaction activity, employment, and unemployment conditions. When this dimension is negative, speculative equity-market strength transmits less effectively into durable household risk-taking.

Macro Liquidity & Business Confidence also remained below neutral at -0.69. The practical implication is that the recovery needs broader confirmation.

2. Institutional vs. Retail Sentiment

Individual retail investors in China remain steady but calm. While retail investors are actively participating, the market is not currently overheating into irrational optimism.

Big banks and international funds have become noticeably more optimistic about Chinese equities. After dipping slightly in April, institutional sentiment jumped sharply in late May, climbing to 0.59.

Our Views This Month

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