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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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If you missed our launch piece, you can read it:

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Is the delivery war drawing to an end?

From 2025 to the present, China’s on-demand delivery market has been shaped by an intense subsidy battle—primarily between Meituan and Alibaba’s Taobao Flash Purchase (淘宝闪购). By using proprietary data on top 5 tea and coffee brands from BigOne Lab, Baiguan’s data analytics arm, this analysis examines how the dynamics of the “third-party delivery” (3PD) market are shifting, and why the war appears to be drawing to a close.

1. 3PD Growth Still Outpaces Overall—But the Gap Is Narrowing

The five brands we have chosen for this analysis are Luckin Coffee, Mixue, Guming, Starbucks, and Chagee.

From January 2025 to April 2026, the five brands’ 3PD channel YoY growth consistently outperformed their overall brand growth, proving that subsidized delivery has been a key growth engine.

However, the gap peaked during the peak subsidy months of June through September 2025 and has since been steadily narrowing. By early 2026, the gap between 3PD and overall growth rates had narrowed significantly, suggesting that the subsidy-driven boost was fading.

2. 3PD Share of Sales Is Declining

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On days like this, we think this is the perfect time to share with you a wonderful guest piece from that will give you a systematic review of risk, reward, and the right allocation strategy to China from the perspective of someone who has been working and investing in this part of the world for almost 2 decades.

Pandawatch‘s real name is Enrique Becerra, a Hong Kong–based investor who has managed his own capital full-time since 2017, focused on China A-shares and Hong Kong-listed equities. He is the author of the monthly letter “Investing in China”. He also tweets @pandawatch88. Based in Hong Kong since 2007, he spent 16 years as an M&A investment banker at Citi and Bank of America Merrill Lynch, most recently as Managing Director and Head of Asia Financial Sponsors, executing deals across Greater China, Korea, and Southeast Asia.

Enjoy!

Reconsidering Risk, Reward, and Allocation to China

By Enrique Becerra a.k.a

Why this article exists.

Back in January I published a deck called A Hitchhiker’s Guide to the China Stock Galaxy: 2026–2030. I made it because in conversations with fund managers I kept hearing the same story: it has become really hard to have a meaningful discussion with US and European allocators about China.

The moment someone in the room says “yeah, and what about Jack Ma”, “tutoring stocks”, or “Taiwan”, the conversation ends. Zero nuance. This piece puts these one-liners under scrutiny.

Because of the above, many have missed a 15% China rally in 2024, then a 30% rally in 2025, and then the doubling of the onshore tech index Chinext over the last 12 months.

Or at best, enjoyed a 3% allocation to it. Wait what, 3%?!

Intro: According to MSCI and FTSE, the China market is the size of Canada.

China is the second largest equity market on the planet, at about USD 22 trillion of market cap across Hong Kong, Shanghai and Shenzhen. It is also the second largest market in terms of overall liquidity and number of Fortune 500 companies.

However, China weight in the global index benchmarks MSCI ACWI and FTSE All-World is 3%. The same as Canada. Half of Japan.

If we were to re-do the MSCI ACWI by actual market cap, China weighting would be 15%. Similar to its share of global GDP, which makes more sense.

There are a few reasons why both MSCI and FTSE do the weights the way they do. It doesn’t mean you should too, as it may not give you a balanced global exposure.

I don’t expect this massive underweight to close anytime soon. Changing the methodology to more closely align to market cap would mean reducing US from 63% to 52% and corresponding outflows. Good luck to MSCI CEO in that endeavor. But the gap may eventually narrow, and this is something to keep in mind.

What is the right number? We come back to why this article exists: many institutions operate in an environment not conducive to having a nuanced discussion about China investment risks or rewards. And without an informed view on risk and reward, you can’t size a bet.

The article is divided in three parts. Part 1 talks about five risks. Part 2 talks about three rewards. Part 3 talks about strategies to allocate money.

The point of this piece is to help allocators re-examine their China assumptions. Do not treat it as a comprehensive review of risk or a scientific paper, but a source of ideas and ammunition to discuss with peers. The answer may still be a zero China allocation, but at least it’s an informed zero.

Part 1: A better understanding of Risk in China.

Some investors (not you of course, dear reader) approach China risk in the same way they approach the country weightings: “if MSCI says it is 3%, that is probably the right number.” Therefore “if well-regarded guru says that a conflict in Taiwan means China equities are a doughnut, that’s probably the right pastry.” Investors love narratives, heuristics, and outsourcing due diligence to others.

Below I examine five common China risk narratives:

• China is ultracompetitive, nobody makes any money

• Your upside is capped, the government doesn’t let companies become too big

• The core mission of Chinese companies is different from US companies

• Regulations move fast in China

• Taiwan

The first two sound good in the echo chambers, but are light in substance. The last three are more serious.

Risk 1: “China is ultracompetitive, nobody makes any money.”

Saying this has become very trendy recently. People will reference a book author that makes this point in every podcast, or a post on X from someone that just did a factory tour in China. It sounds smart, fits many priors, and if you look at the actual numbers, it turns out to be inaccurate.

As with every good-sounding story, it must have a piece of truth. And for sure: certain industries, like solar, are incinerating money.

The missing truth however is that in a majority of very competitive industries, like EVs, consumer electronics, retail, industrial automation, etc, you have market leaders making good money: BYD was loss making in 2019 and made USD 4bn in profits in 2025, while its competitor Geely doubled profit this year to USD 2bn. Xiaomi was making USD 1bn in profit in 2019 and made USD 5bn in profits in 2025. Midea and Haier, competing white goods manufacturers, or Anta and Lining, the two largest Chinese sportswear brands, have all doubled profits in the 2019 – 2025 period, while navigating a very tough and deflationary consumer macro environment. Among industrial manufacturing names, heavyweights like Nari or Inovance have doubled and tripled their profits respectively in the same period.

Survivorship bias in the sample? Maybe. What about the generic widget manufacturer with 1% market share? Yes, that one is probably struggling. It should be noted here that 40% of the companies in the Russell 2000 have negative earnings. Losses are not a uniquely Chinese export. Takeaway for risk management? Do not predict, observe, invest in the ones growing profits. Another takeaway: question hot takes from podcasts, numbers please.

Profits do not always go in a straight line up and to the right. There are investment cycles and there are collecting cycles. The combined profit pool of the top 10 retailers in China doubled from USD 29bn in 2019 to USD 62bn in 2024 despite the industry experiencing intense ecommerce rivalry in 2021–22. In contrast, in the same period, the top 10 US retailers, despite a milder competitive environment and much better consumption macro with stimmy checks, just grew their profit pool by 50%.

Back to China, 2025 saw another investment cycle begin among ecommerce players aiming to expand the pie of quick commerce and fight for the largest piece. We’ll see how that shapes out in 2026-27, and if we come out the other side with usd100bn combined EBIT.

China Top 10 retailers EBIT (USD bn).

Competition? Big. Killing industry profits? Not necessarily.

Risk 2: “Your upside is capped, the government doesn’t let companies become too big.”

China currently has 23 listed companies with market cap above USD 100bn, and 8 of them are controlled by entrepreneurs. Ten years ago, it was basically just one. Entrepreneurs and their shareholders have made money.

At the start of 2026, Hurun counted 1,000 billionaires in China vs. 550 in 2016, doubled. The top 10 today are worth USD 490bn vs. USD 190bn in 2016, more than doubled.

If the system was set up to chop tall trees, one would expect the counts above to be stagnant. What is stagnant is the number of billionaires publicly criticizing SOE banks.

Let’s move on to what I consider more serious risks. The first is more philosophical, the next two more tangible.

Risk 3: The core mission of Chinese companies is different from US companies.

Borrowing some reasoning here from Midea’s chairman: the history of the Chinese equity market is too short. Private companies and the stock market have existed in the US for 200 years. In China, for less than 40 years.

In the US there is a well-established understanding: companies are not expected to shoulder excessive social responsibilities; their core mission is to maximize profit and shareholder value.

In China such consensus has yet to be formed. The experience is too brief. Right now, the stock market exists to serve “the real economy”, and companies exist to serve “national development” goals. An investor in China must be aware of what these goals are.

For example, from a recent article in Qiushi outlining economic priorities: “…to foster a group of new growth engines, including new-generation information technology, artificial intelligence, biotechnology, new energy, new materials, high-end equipment and green industry during China’s 15th Five-Year Plan period (2026-2030).”

If you don’t pay attention to the shift in goals, you risk missing the action. Or worse, you risk being offside, which takes me to our next risk.

Risk 4: Regulations can move fast in China.

For better and for worse. We are going to focus on the “for worse” here, with a few examples. There’s nothing too esoteric behind regulatory actions and the tea leaves come in capital letters. The issue is execution, which is faster than in other jurisdictions and can lead to wild price moves.

First, in many cases regulatory action is actually not that fast, but still somehow manages to surprise investors:

• The afterschool tutoring ban came after 2 years of warnings (in NPC statements and state media) about the pressure this product was putting on families. Investors ignored and kept buying, chasing price. When the regulatory hammer came, EDU and TAL were trading at 80x LTM PE

• Last week, after three years of warnings, FUTU and two other online brokers got fined by CSRC around 15-20% of annual profit for servicing mainland residents without a securities license (people were wondering if CSRC had forgotten about them, nope they had not). Investors learn though, and this time when the penalty arrived the valuation was not 80x PE but 12x PE, already carrying the regulatory uncertainty

Other times regulation does come very fast as a response to specific company actions like:

• Didi rushing a US IPO in June 2021 ahead of a new data law coming into force in September 2021 (risk factor #6 in the prospectus). Two days after the IPO, CAC launched a cybersecurity probe, banning new user registrations and pulling the app from domestic stores

• The well-documented drama around Ant Group, which needs no recap

And in other cases, regulatory action comes to companies where users complain about market dominance, but the trigger and timing can be random and abrupt. For example:

• Antimonopoly investigation into Trip.com, where small hoteliers had been complaining to local regulators that the platform was forcing them into exclusivity and to give up control over room rates. Trip got a few small fines over the past couple of years, but eventually SAMR decided to jump in. Meituan went through a similar process in 2021 and came out with a USD 500m fine but higher revenue and margins (they have bigger problems now, I’m sure they miss SAMR)

• The caps on pricing for online consumer lenders like QFIN and FINV, an industry where in the risk factors of smaller players you can read gems like “we indirectly charge our borrowers in the manner our borrowers are not aware of.” Turns out borrowers found out

• Regulatory action aimed at companies extracting rents is not a uniquely Chinese export, see FICO and UnitedHealth investors for details

Finally, regulatory action can provide opportunity. Moutai was a 12x bagger in 5 years after regulations to curb government spending on banquets and gifts took the stock down 50%. It is important to distinguish between regulations targeting the company, the product, or the behavior.

Practical implications for risk management: there are 8,000 listed companies in China, minimize your exposure to those working against the direction of policy (see risk 3). If you want to be involved because the risk reward set-up makes sense, size appropriately.

Risk 5: Taiwan.

Everyone has their own very thoughtful take on CCP stated goals, DPP stated goals, the outlook for the new KMT president, and the latest DJT commentary. Fine.

As an investor looking to measure this risk, I just look at the issue in two ways. First, the incentives for something to happen, and second what then if something happens.

In the short and mid-term, the incentives for all three parties point against escalation. US does not want to lose access to TSMC fabs or the supply chain for DC infrastructure components. It would slow down AI progress. Intel is not going to make cool Rubins anytime soon. Further, without access to TSMC, Nvidia, Microsoft, Google, and Apple share prices could be cut in half. The other two parties would suffer tragic human losses. No one wins much.

But accidents can happen. And here investors do a quick “reasoning by analogy” and assume China stocks are a zero, because of what happened to Russia. The analogy doesn’t work because China is a different global economic actor than Russia. In a Taiwan conflict, with the global tech supply chain in disarray, are you so sure that US and Europe will go down the massive sanctions route, and further spread the pain to industries that rely on access to China supply chains or sell to Chinese buyers? Maybe yes. But maybe not.

Before assuming this scenario is a zero for China stocks, a bit more work should be conducted on incentives, dependencies, and resilience. Once the work is done, maybe we find out that one way to diversify this risk, which would hit global equities hard, is to actually own some China. Counterintuitive? Huawei chips are not using TSMC fabs, and China has its own domestic datacenter supply chain.

Hope we don’t have to test any of this. People on both sides just want to keep enjoying life, eating good food, and having fun with friends. Let’s keep it that way.

[Baiguan’s note: Robert recently wrote about why it is highly unlikely for China to take military action against Taiwan]

Wrapping up the risk section.

Other risks not discussed here, but that you should think about, include:

• “The GDP has doubled, but the stock index has not, means massive dilution” which if you are versed in basic arithmetic you can quickly dismiss by looking at the expansion in the number of index components

• Known-unknowns such as deflationary cycle and population contraction

• Unknown-knowns such as what comes after the Xi era

• And unknown-unknowns which, you see, I don’t know

Human systems live in a critical state. Never underestimate what can come next.

Part 2: The Reward side of the equation.

Like the risk side, the reward side in China often suffers from the same: too much story and little substance. Back in 2010 we IPOed restaurant companies in China with “80 locations but TAM of 1.2bn people”.

Let’s tackle the reward side in a more serious and tangible way. I’ll cover three:

• At the portfolio level, China offers diversification of economic outcomes

• At the company level, geopolitics is paradoxically expanding TAM and accelerating growth

• At the market level, domestic capital markets are going through a step change that is bringing new ideas to investors

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The China Securities Regulatory Commission (CSRC) and seven other government agencies announced that these firms violated domestic laws by facilitating unauthorized overseas stock trades for mainland retail clients without the necessary onshore licenses. In response to the breaches, regulators are imposing severe financial penalties, including a proposed $271 million fine for Futu and over $50 million in combined fines and asset confiscations for Tiger Brokers.

As part of a two-year campaign to aggressively enforce the country’s strict capital controls, the targeted brokerages are now barred from accepting new investments from mainland clients and have been ordered to systematically wind down existing non-compliant accounts.

Is this a surprise?

While the sheer size of the fines and the strict two-year mandate to entirely shut down operations for mainland clients made headlines, the writing has been on the wall for years. This recent announcement represents the final “dropping of the shoe” in a 5-year-long regulatory campaign rather than a sudden policy pivot.

Here is a timeline of key events leading up to today:

• October 15, 2021: The CSRC first expressed its displeasure with cross-border online brokers’ “illegal activities” through media reports.

• December 30, 2022: The CSRC issued an official warning that Futu and Tiger Brokers were conducting cross-border securities business for mainland investors without the necessary approvals. The regulators explicitly labeled these activities as illegal and ordered the firms to stop soliciting new mainland clients, while leaving open the question about how to treat existing clients.

• January 13, 2023: The CSRC released the Securities Brokerage Business Management Measures, which formally established that “domestic securities business must be licensed” and expressly prohibited foreign institutions from conducting unauthorized marketing, account opening, or trading services.

• May 2023: In a major step toward compliance, both Futu and Tiger Brokers voluntarily removed their trading apps from online app stores in mainland China, effectively cutting off the easiest access point for new domestic retail investors.

• July 2025: The China Securities Journal exposed how Tiger Brokers was still attempting to circumvent the regulatory ban by using “edge-pushing” (擦边) tactics, such as using WeChat customer service agents to supply mainland investors with fake overseas stock trading records, to help them qualify as “existing overseas investors” and bypass the compliance blocks.

• May 22, 2026: Friday’s final regulatory decision was made.

What’s the impact on online brokers like Futu?

According to various sources, about 13% of Futu’s accounts are held by mainland investors, which represent around 20% of Futu’s client assets and 25% of revenue. Theoretically, if all of those mainland investors sell their shares, that would be about a 20-25% hit to Futu’s financials.

The actual impact could be smaller because the government is also making it clear that mainland investors who live overseas and trade overseas will not be affected, limiting the actual impact.

Moreover, in practice, determining if someone is “living overseas” is more nuanced than it sounds. It is certain that Futu will close all its mainland-based operations and will likely block visits from mainland China. However, in practice, it is entirely conceivable that someone with a VPN and some form of proof of a foreign address could establish themselves as a foreign-based investor and thus continue trading.

What’s the impact on China ADRs

Futu and Tiger Securities' stocks collapsed due to this news. Along with it, the entire China ADR and internet space also dropped on Friday. There were fears that the “forced selling” by these brokers would exert significant selling pressure on the ADRs.

But these fears do not stand up to scrutiny.

Of the mainland investors investing through Futu and Tiger, it is likely that purely US stocks like Nvidia and Tesla make up the majority of their portfolios. This is because many dual-listed ADRs (e.g., Alibaba) and most large to mid-cap Hong Kong stocks (Tencent, Meituan, etc.) are already accessible through the Stock Connect program, allowing mainland investors to invest directly from onshore. Consequently, there is no particular reason these investors would go all the way overseas to invest heavily in China ADRs.

Let’s take Tencent, a popular Chinese stock listed overseas, as an example. According to the Hong Kong Stock Exchange’s own data, investors who bought Tencent shares through Futu accounted for only ~0.8% of Tencent’s total share base. Assuming 20% of those are held by mainland investors, Tencent's actual stake “at risk” would be less than 0.2%.

For the bigger picture, at the end of 2025, Futu held around $160 billion in total client assets. At 20%, around $32 billion of those belong to “mainland investors”. If we assume 30% of those were held in overseas-listed Chinese stocks, that would amount to only $10 billion. On the other hand, all of the companies in the KraneShares CSI China Internet ETF (KWEB) alone are worth more than $1 trillion. So, at most, it will have a net selling impact of just 1%. And if we take into account all non-KWEB Chinese companies and the aforementioned fact that some “mainland” money would still remain, the final impact will be far less than 1%.

Is this the beginning of a market-wide, 2021-style regulatory crackdown?

I suspect the actual reason for the broader sell-off was the PTSD that investors still had from the terrible memories of the 2021-2022 period of government crackdown, such as the infamous one on after-school tutoring. At the time, there was a consensus (which I didn’t agree with) that there was a systematic and concerted effort to crack down on the private economy.

Is this regulatory action against overseas online brokers a sign of the bigger crackdown? I don’t think so. This is clearly an industry-specific regulatory action that has been lurking around for years.

The regulator, drawing on lessons from the past, seems also to be trying to compartmentalize the issue. The actual fines imposed on Futu and Tiger for the illegal offenses are lower than many expected, and a two-year window for asset liquidation seems very reasonable. Also, as mentioned previously, it took them about 5 years of piecemeal regulation and cat-and-mouse games to get to this point.

Overall, the authorities did not seem as heavy-handed as they were in 2021 during the “double-reduction” episode, and the market has now developed a normalized view of the regulatory landscape.

Any other stones unturned?

By now, a natural question is whether there are still similar “slow-burn” regulatory stories lurking in the corner that we should be aware of.

In the paywall section below, I’ll give a full review of 2 potential flashpoints and 2 areas that are seemingly flashpoints but aren’t.

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Mr. Yao is an expert on credit in China, and I can’t possibly think of anyone better qualified to opine on this topic.

If you want to get in touch with Mr. Yao, and want to know more about his company’s services, please send us an email at baiguan@bigonelab.com

Why China’s April Credit Data Looks Terrifying (And Why It Shouldn't)

By YAO Yu

To a foreign observer accustomed to two decades of China’s relentless, credit-fueled economic miracle, the April 2026 financial data released by the central bank looks like a red flag sounding a severe economic contraction.

The headline number that shocked analysts the most was the outright contraction in bank lending: new Renminbi (RMB) loans actually fell into negative territory at -10 billion RMB. This is a jarring anomaly, indicating not only a slowdown in growth but also that more money was repaid to banks than was lent to the real economy.

Across the board, the metrics point downward. New Total Social Financing, China’s broadest measure of credit and liquidity, came in at only 624.5 billion RMB, which is a massive drop of over 535 billion RMB compared to the same period last year. The pain was particularly acute at the consumer level, with household loans plunging by nearly 787 billion RMB as both short-term and long-term borrowing contracted.

For international readers and investors, these data points traditionally lead to a single, terrifying conclusion: a stalling macroeconomic engine. Negative loan growth usually suggests that businesses are refusing to expand, factories are halting capital expenditure, and consumers are hoarding cash out of fear of a looming recession.

Yet, if you look across the broader macroeconomic landscape, a barrage of contradictory signals emerges that makes it difficult to find consistent evidence of a stalled economy. For instance, trade metrics have maintained high growth, with April exports surging by 14.1% year-on-year in US dollar terms and imports jumping by a remarkable 25.3%. On the industrial side, the manufacturing PMI stayed comfortably in expansionary territory with an improving production sub-index, supported by increased electricity generation and solid growth in high-frequency infrastructure production data. Furthermore, price and currency metrics tell a resilient story: CPI, PPI, and real estate prices all showed improvement in April, while the RMB continued to strengthen. These robust indicators suggest we are witnessing a complex divergence rather than a systemic breakdown.

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Beyond the Aggregate: A Signal of Transition, Not Just Contraction

Why does such a glaring contradiction exist?

The decline in credit isn’t merely a cyclical downturn or a collapse in confidence. It is a fundamental restructuring of how the Chinese economy finances itself. To understand what is actually happening, we have to look at the four major shifts occurring right now across personal, government, and corporate balance sheets.

1. The Rational Deleveraging of the Chinese Consumer

The sharpest decline in credit is happening at the household level, driven primarily by the ongoing housing slump. But this isn’t just about consumers hiding money under the mattress in a panic, but about cold, hard math.

Right now, consumers are facing a stark interest rate inversion. The interest rates on outstanding mortgages remain relatively sticky, while the yields on wealth management products, funds, and standard savings have dropped. If your mortgage costs you 3% but your investments are only yielding 2% or less, the most rational financial decision you can make is to pull your liquidity and pay down your debt early. Chinese consumers are actively and rationally deleveraging to optimize their personal balance sheets.

2. The Illusion of Shrinking Government Credit

On the government and corporate side, the data is being heavily distorted by a massive financial cleanup. Local governments are in the midst of a historic effort to substitute high-interest, hidden debt (often held by Local Government Financing Vehicles) with official, lower-cost sovereign bonds.

When a local government issues a new bond strictly to pay off an old, off-balance-sheet loan, the total amount of “new credit” injected into the real economy is effectively zero. In the aggregate data, this looks like a severe slowdown in credit expansion. In reality, it is a risk-mitigation exercise. The debt isn’t fueling new bridges or factories right now, but being restructured to prevent systemic instability.

3. The Corporate Migration to the Bond Market

Even when corporations are actively seeking capital, they are dramatically changing where they get it.

In the current environment of loose macroeconomic liquidity, issuing bonds has become significantly cheaper than taking out traditional bank loans.

High-quality enterprises are acutely aware of this cost advantage and are actively optimizing their debt structures.

The April 2026 data illustrates this substitution effect perfectly: while medium and long-term corporate bank loans suffered a massive contraction of 410 billion RMB (a year-on-year drop of 660 billion RMB), net financing from corporate bonds surged by 452 billion RMB.

Breaking that down further, industrial bonds jumped by 384.1 billion RMB, and LGFV bonds increased by 54.4 billion RMB. With the median coupon rate for newly issued credit bonds falling to a mere 1.9%, corporate liquidity hasn’t dried up, but it has simply migrated to the cheaper bond market, making traditional bank lending figures look artificially anemic.

4. The New Economy Runs on Equity, Not Debt

Perhaps the most crucial blind spot in traditional credit analysis is how the drivers of China’s future growth are actually funded. For the last two decades, economic growth was driven by real estate and heavy infrastructure, industries that rely heavily on massive, traditional bank loans.

Today, the growth engines are emerging industries: artificial intelligence, advanced semiconductors, and green energy. These sectors do not thrive on traditional bank debt. They rely heavily on equity financing, venture capital, and state-backed investment funds. Because traditional credit metrics were designed to measure the old economy, they are structurally blind to the capital flowing into the new economy.

The Takeaway

Using aggregate credit data to diagnose the health of the Chinese economy in 2026 increasingly looks like using a thermometer to measure wind speed. The tool is simply outdated for the current environment.

The shrinking credit figures are certainly a reflection of real estate pains, but they also represent a deliberate consumer deleveraging, a cleanup of local debt risks, a corporate migration to cheaper bonds, and a pivot toward equity-driven tech growth. The Chinese economy is transitioning, and it is time our analytical frameworks transition with it.

Related Readings

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.

If you missed our launch piece, you can read it:

As a reminder, existing paid subscribers can claim a complimentary upgrade to Baiguan Pro (offer ends on June 30, 2026) by simply replying to this email.

In Today’s Data Update

We are updating four sectors that we recently wrote about in the Baiguan newsletter, or mentioned as ideas to watch in Baiguan pro content, with BigOne Lab’s proprietary data as of April 2026:

• Sportswear & footwear: Q1 saw a broad-based recovery across athleisure, running, and outdoor, and we will break down the winners and losers. Notably, Lululemon was probed for potential toxic chemicals in its fabric and made Chinese social media headlines, and we will share whether this is an early sign of a sales impact.

• Gold jewelry: March marked a sharp reversal for Laopu after a blockbuster Q1, with gold price volatility weighing on price-sensitive buyers. With promotional activity ramping into May, the key question is whether April’s data shows stabilization, further softness, or something else investors should be paying attention to.

• Luxury goods: Q1 hinted at a gradual stabilization in Chinese luxury demand, but brand-level dispersion has been the dominant theme. We will share insights about which segments are sustaining momentum into April, and which megabrands are losing ground.

• Pop Mart: March already showed cooling in IP heat as the Sanrio collaboration came in below expectations. We will provide updates on April’s new product launches and on secondary market price trends.

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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You’ve seen this story at the premium end, which we’ve covered extensively — most obviously with Laopu Gold (老铺黄金), the Beijing-founded “Hermès of gold” that I’ve written about several times. Laopu listed in Hong Kong in mid-2024 and the stock subsequently rallied more than 20x, briefly touching ~HK$150 billion in market value, on the strength of nothing more exotic than reviving Chinese traditional goldsmithing techniques — hammering, filigree, hollowing, and enamels — and packaging them as luxury. And you’ve seen it at the more mass-market end too, like with the Tong Shi Fu IPO (铜师傅) piece, where copper artisanship, middle-aged male gifting, and Pop Mart-style branding all blended into one investable asset class.

But over the years, the “intangible cultural heritage” labels are now EVERYWHERE. What started as a marketing label has matured, and consumers are starting to look beyond the surface.

Consumers are no longer satisfied with brands that just slap a heritage sticker on a generic SKU. They’re going deeper — looking for the real roots, the real history, the real design niches. And the data is starting to show it.

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Our own data: antiques and collectibles are quietly outrunning the consumer market

Our own online sales data this year revealed something that genuinely surprised me. The categories of antiques and collectibles are growing at a year-on-year pace that beats less-niche categories.

This is happening against a backdrop where overall Chinese consumption is, to put it kindly, not as strong as it used to be. So when a niche, “what-on-earth-is-that“ category outpaces the broader market, that’s a signal worth paying attention to.

In the collectibles category, the brand topping our charts both in absolute sales and in growth this year is a name most foreigners (and frankly, many Chinese people) have never heard of: 开心集藏 (which loosely means “Happy Collecting“).

The more interesting thing is what Happy Collecting’s core product is: bookplates/ex libris, which are small, often beautifully designed slips of art that book collectors paste inside the front cover of their books to mark ownership.

Bookplates originated in Germany in the mid-15th century, but fit into Chinese culture in a very specific way. China has its own much older parallel tradition: 藏书印 (cángshūyìn), the personal book seal, which dates back at least to the Eastern Jin dynasty and is one of the classical “studio elegances” of the Chinese literati. Every serious old-school Chinese book collector — from Ming-dynasty scholars to early-20th-century literary figures — had a personal seal that they would stamp inside their books.

Happy Collecting’s best-selling bookplate themes feature imagery deeply rooted in traditional cultural symbols, such as the Forbidden City. Many also tap into patriotic sentiment, with themes ranging from historical slogans like “Serve the People“, wartime era heroes, to cutting-edge aerospace achievements like China’s domestic J-series fighter jets.

The company itself runs on a fairly typical Chinese e-commerce and MCN model. The operating entity actually started as an internet company back around 2014. It pivoted into e-commerce and livestreaming in 2021, and only in the last year or so really pivoted to the cultural collectibles categories, but is already selling well over one million RMB a month just in online sales.

It partnered with many state-owned entities and companies, and is now the exclusive online channel partner for state-affiliated heritage institutions, including the Shanghai Mint and the China Numismatic Museum. That kind of partnership is meaningful, as these institutions usually hold the most widely recognized and lucrative cultural and historical IPs in China.

In the antiques category, what I noticed is even more telling. Almost all of the emerging brands topping our charts are domestic jewelry brands explicitly inspired by Chinese antiques or ancient aesthetics — not foreign luxury houses, not traditional gold chains, but new Chinese brands designing in the language of ancient Chinese motifs.

So far, the #1 brand in the category this year is 铭舍 (MingSir). Founder 陈一铭 (Chen Yiming) opened the first Ming She storefront at the end of 2013 — in a cultural relic market in Jinan, Shandong. He started by selling natural amber, turquoise, agate, and South Red agate, all materials with deep historical associations in Chinese ornament. He grew from a single small shop into a wholesale network supplying jewelry and jade shops across Shandong province, then transitioned hard into Douyin livestream commerce. He now sets monthly GMV targets in the hundreds of millions of RMB during peak shopping festivals, and has reportedly hired 70–80 people just to do quality control on individual beads. That’s a tier of operational discipline that most observers don’t associate with “people selling antiques on Douyin.

The pattern, in both cases, is the same: these brands almost all heavily invest in online presence. Despite being still relatively small, local and somewhat elusive — but they’re burgeoning.

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The cultural sensation behind all of this: the antique livestream craze

If you want a single piece of cultural evidence that Chinese young people have fallen in love with their own heritage, it’s a man on Douyin who calls his show 听泉赏宝 (roughly translates to “Listening-to-Springs, Admiring Treasures“).

His real name is 丁祥栩 (Ding Xiangxu). He posted his first short video on Douyin in April 2023 — titled “door-to-door buyback” — and started livestreaming antique appraisals (mostly ancient coins, at first) in August 2023. For the first few months, his streams pulled tens of thousands of viewers. Nothing crazy. Then, in early 2024, something flipped. By early 2025 his Douyin account had ~37 million followers and over 130 million total likes — making him, for a stretch, the single highest-profile cultural-content creator in China.

The format is part of what’s so revealing. Random viewers dial into his livestream holding up “treasures” they claim to have found in an attic, dug up in a field, inherited from grandfather, etc. — and he immediately, on camera, tells them whether it’s a Han-dynasty bronze or a 50-RMB tourist-stall fake. The bits often go viral: a guy holding up what he insists is a Ming sword turning out to be a 1990s factory tin; a grandmother showing a “Qing imperial” hairpin that turns out to be real and worth a small fortune. It’s pure infotainment, but it’s Chinese cultural infotainment — every clip is a free, two-minute crash course in ceramics, bronzes, coins, jades, and calligraphy.

He’s also been at the center of controversy: in October 2024, he abruptly went on hiatus after a viewer brought what they claimed were stolen museum artifacts to be appraised on his livestream. But nevertheless, tens of millions of young Chinese consumers are watching this for fun.

Ding’s sensational success very much mirrors that of Dong Yuhui, who rescued New Oriental’s failing business after the 2021 Chinese policy overhaul that prevented the company from providing tutoring services — he did it with the educational, informative style of his livestream sessions. Chinese consumers are generally very inquisitive and eager to learn, and right now that curiosity has shifted toward their own historical and cultural roots.

Take a step back, and what’s actually striking is that even the oldest, most “low-tech,” most stubbornly offline corners of the Chinese consumer economy — antiques, heritage collectibles, traditional jewelry — are now being run under an MCN + livestream model. That is quite different from how these industries operate anywhere else in the world. (For instance, you don’t see Sotheby’s running a Douyin account with millions of followers in China.)

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My three takeaways: organic growth is hiding in “what-on-earth-is-that” categories

These brands are small. They’re local. They’re easy for foreigners — and frankly, for Chinese locals too — to miss. But I think the pattern matters, for three reasons:

First, China’s organic consumer growth has moved into the niches.

When I say “niche,” I mean something quite specific — categories that are obsessively cherished by one group, and that another group would react to with “wait, what is that? I’d never spend money on that, ever.” That’s where the growth is now. Mass-market consumer needs are largely satisfied; the logical end-state there is a price war (which we’re already seeing in autos, in food delivery, in coffee, in clothing, in electronics — you name it).

Niche-enthusiast demand, on the other hand, is where consumers are still willing to pay a real premium — and where competition is fragmented enough that a single well-run brand can still build a meaningful business.

Let me give you an example: in Beijing, where I live, a lot of locals are deeply into collectible walnuts. Your reaction might be, “what could there possibly be to buy about a walnut?” — but real Beijing walnut connoisseurs can rattle off varieties the way a wine collector does grapes. A nice matched pair can run several thousand RMB; a premium pair can run as much as 300,000–400,000+ RMB (~US$50,000), with a very active secondary market. (Picture trading Labubu on the secondary market — but for walnuts.)

Of course, the walnut market is just one example. There are many such niche markets that I’m not even aware of, but they’re quietly burgeoning across China.

According to some industry research, as of 2021, roughly half of online cultural-collectibles buyers were young (between 25 and 34 years old). On Xiaohongshu, the #文玩女孩 (”girls who collect”) tag has cleared 2.3 billion views — a clear signal that this is a consumer trend you cannot ignore.

(If you think about it, isn’t Labubu also one of the “what-on-earth-is-that” for many?)

Second, the “brand-ification trend” of these cultural IPs has accelerated.

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Every AI boom needs infrastructure. In the US, that conversation centers on hyperscalers racing to build data centers. In China, the same logic applies — but the players, incentives, and market structure look very different. Understanding this landscape is increasingly relevant as capital continues to flow into China’s AI infrastructure story.

China’s AI data center (AIDC) market is in the middle of a massive buildout. Goldman Sachs projects China’s top internet firms to invest $70 billion in data centers in 2026, with power demand from the sector rising 25% that same year.

For context, the US still leads on accumulated computing power: a Federal Reserve analysis from late 2025 estimated the US controls roughly 74% of global high-end AI compute, with China at 14%. The spending gap reflects this: the four largest US hyperscalers (Alphabet, Amazon, Meta, Microsoft) have collectively committed around $650 billion in AI infrastructure for 2025–2026, versus China’s $70 billion. While China lacks an accumulated share of computing, it is racing to close through a faster power infrastructure buildout.

Disclaimer: This is not investment advice. Please conduct your own research before making any financial decisions.

The China data center market is not one market. It splits along two axes that matter for investors. The first: who owns the infrastructure — third-party neutral operators, state-owned telecom giants, or the hyperscalers themselves? The second: what does the infrastructure do — massive GPU training clusters for frontier AI, or edge inference for production deployment?

The picks-and-shovels layer: who actually builds the GPU warehouses

China’s cloud and data center market has split into two.

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Five years ago, mid-sized companies (100–999 employees) contributed a significant portion of the jobs. If we take online recruitment platforms as a proxy to analyze China’s labor market, six out of every ten jobs came from a mid-sized employer in 2020. But today, fewer than four out of ten do.

These postings haven’t migrated up to large enterprises; instead, they’ve migrated down to small companies with fewer than 100 employees.

Two possible stories could explain this:

1. Companies are becoming more entrepreneurial, potentially benefiting from productivity gains driven by AI and automation.

2. Mid-sized firms are laying off staff and posting fewer jobs, which mechanically lifts the small-firm share without any sector actually ‘winning.’

There could certainly be a combination of these two factors—as well as other, more complex dynamics at play. However, by analyzing the relationship between changes in job posting volume and average salaries, we can gain a clearer sense of the underlying reality. (For instance, a sector benefiting from productivity gains would likely see both job growth and rising salaries, even if those roles are concentrated in smaller companies. )

Crucially, this overall shift reveals significant nuances across different industries. We analyzed 13 major industries that provide the bulk of China’s online job opportunities, examining 75 months of data since 2020 to determine which narrative holds true for each.

Specifically, for each sector, we looked at the following angles:

• The share of all job postings by company size: To see whether the broad structural shift holds true for the industry.

• Change in total job postings and average salary by company size: Is the pie growing or shrinking?

• Employment quality: We use the share of part-time/gig jobs over total jobs as a proxy. While not a 100% accurate representation, an increasing share of part-time employment could indicate that companies are prioritizing cost flexibility, and that employment stability is declining.

Note: Online recruitment platform data may carry a bias toward white-collar roles.

“Charts of the Week” is Baiguan’s series that features key data points to help you quickly grasp the general state of affairs in China in just a few minutes. We handpick the highlights of the data charts from a variety of sources, analyzing and delivering insights trusted by 100+ top institutional and corporate clients worldwide at BigOne Lab. Don’t forget to subscribe before you continue reading!

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At Baiguan, we’ve been covering this social phenomenon many times in the last couple of years.

Recently, the concept has taken on a political tone, with authorities redefining it from a social trend to a critical national security concern. In April 2026, the Ministry of State Security (MSS) released an unprecedented official warning, labeling the "lying flat" rhetoric as a form of "ideological infiltration" orchestrated by hostile foreign forces to brainwash and destabilize China's youth and made it clear that "lying flat" is no longer just a lifestyle choice, but a political act that the state is prepared to actively suppress. (You might want to read this satire piece by related to this topic.)

Why has “lying flat” become such an important topic? Apart from the economy being in a slower-growth mode, what else explains it?

We offer face-to-face discussions with Baiguan Pro subscribers. A few weeks ago, I had such a meeting with a Baiguan Pro subscriber from Europe at our Shanghai office. We discussed the economy, generational differences, and employment.

Clearly, household confidence in China is on a trajectory of stabilization and moderate recovery. The negative wealth effect from a falling real estate market seems to be tempering, while the positive wealth effect from a gradually rising stock market is also having a positive impact.

But when it comes to the job situation, the picture is fuzzier. We have indirect proxies, such as job posting data, that can give us a view of the quality and supply of jobs. However, as for the actual unemployment situation, we do not have visibility beyond official statistics. Even in official statistics, the youth unemployment rate remains elevated at 16.9% as of March 2026, and that’s after counting anyone with no fewer than one hour of work in a week as “employed”.

Yet, despite the serious situation, we have yet to see severe social disturbance and a rise in crime that's prevalent in countries where youth unemployment is this high.

Obviously, China’s tight system of social control, ever vigilant in identifying and responding to potential flashpoints, partially explains this “gap”. But I would argue that mere control can only be expected to delay discontent, but can’t fundamentally change a historic trend.

I believe two powerful social mechanisms are more important here.

First, the young generation of today are the children of those born between the 1960s and 1970s. Their parents, China’s “baby boomer“ generation, have gradually entered their “silver” age.

This generation is special. Their careers have grown in lockstep with the 3 decades of rapid economic development from the 1990s to the late 2020s, making them the wealthiest population cohort in China today. This means that if their kids run into career troubles, these parents are always ready (and generally willing) to step in as the provider of the last resort. For each child who can’t strike out on their own in a first-tier city, there is usually an idle apartment in a second- or third-tier city belonging to their parents that they can always return to.

The other important social mechanism is the “lying flat” culture itself. At the same time, there aren’t as many job opportunities as before. Meanwhile, we have a parent generation who have both the willingness and the means to support their children. Furthermore, a deflationary environment is making everything cheaper than before. So lying flat and not having a job become easy choices for many people.

On China’s short-video platforms, there has been a wave of popular videos (at least before censorship hammered them down) about how to live on an extremely low budget. One vlogger that I sometimes watched documented every day of his life: woke up at about 2:00 PM, played some video games, went out and spent 10-15 yuan ($1-$2) on street food (sometimes even a beer), came back to the apartment he paid almost 0 for and played video games again until midnight and called it a day.

Essentially, this vlogger would only need to spend less than $50 a month and could still get by.

“I can never get my head around the idea that there are so many young people in China who are okay with this,” said my European guest. “For me, to work is not just for money. Working provides a sense of meaning. So it is scary to me when this sense of meaning is lost.“

This comment made me pause and reflect. At that very moment, I suddenly connected the dots and saw why “lying flat” became a thing in a culture that historically has prized hard work above everything else.

Here is my own personal understanding, take it or leave it:

When previous generations of Chinese people worked hard, it usually wasn’t for a “sense of meaning”. It was purely about survival.

Consider the boomer generation: when they were born and raised, they really had nothing in material terms. Because they had nothing, when there was an opportunity to finally have something, they all worked extremely hard. They were genuinely afraid they would be poor forever if they did not work hard. They were also genuinely afraid to be left behind by their classmates, colleagues, and neighbors in this great golden rush away from poverty.

In other words, for most people in China until now, the psychological impetus behind economic growth has been fear-driven rather than purpose-driven.

And because every one of their generation worked so hard, China reached an economy of abundance so quickly and on such an unimaginable scale. Such is how the miracle of the Chinese economy came about.

But then, this miracle provided a new problem. The fear factor is no longer there. “I do not want to live in poverty” is no longer a strong enough motive for people to work. Yet in the meantime, “to work as the meaning of life” hasn’t really existed yet.

Hence, “lying flat” occurred. It’s also why “lying flat” became a trend without creating any real destabilizing factor for society. Had Chinese people always been “purpose-driven”, a lack of things to do would make them restless. But as long as they can keep living without fear of falling into poverty, they can be just fine.

To be sure, lying flat is still not a dominant sentiment right now and is mostly associated with the youngest generation. But in the longer term, perhaps in 10-20 years, as the younger generation get older, this will be a fundamental concern for China’s economy. We risk becoming weary too quickly without getting mentally prepared for this fast abundance.

In this sense, although Beijing’s messaging against “lying flat” may be too heavy-handed, their intention to try to turn back the tide in advance is not wrong in itself.

However, I am quite pessimistic that these “anti-entropy” measures will work, unless our society manages to cultivate a much stronger sense of purpose. But we are talking about changing the fundamental psychological setup of a whole nation here, and obviously this will take an extremely long process and a huge dose of soul-searching at both individual and societal levels.

So my conclusion is, “lying flat” is deeply structural and won’t change just because economic growth re-accelerates in the future. It is here to stay.

As for investors, we should also focus on segments that cater to an ever-growing population with nothing to do, who just want to kill some time and fill some parts of their spiritual void. In the meantime, we should look for entrepreneurs whose inner drive is no longer driven by fear (because the basis for fear is rapidly dwindling), but by genuine love for what they do.

Because fear can only bring you so far, it is love and a sense of purpose that can drive you forward.

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Why investing for income is a good strategy now

A decade ago, this would have been a very different conversation. Chinese equities were sold as growth. The idea of buying stocks for income — just for the yield — wasn't the consensus pitch.

Back then, the baseline expectation was to chase strategies or products yielding somewhere north of 10%. For decades, China’s rapid economic expansion created enormous opportunities to cash in on the secondary market—particularly in the high-flying internet names. In that environment, investing for dividends felt a bit "boring" compared to the hyper-growth happening elsewhere. Plus, the risk-free rate was generous enough that seeking out dividend stocks wasn't an imperative.

That has changed. We are now seeing a convergence of several factors at once:

China’s economy has entered a lower-growth, stabilization phase. In this environment, companies that reliably return capital are worth more than they used to be — the market is gradually pricing that shift.

Meanwhile, the domestic rate backdrop has tilted sharply: China’s 10-year government bond yield has fallen below 2%, a level that was almost unimaginable five years ago. At that rate, a basket of A-shares yielding 4–7% in combined dividend and buyback yield carries a meaningful spread. That’s not lost on domestic institutional investors or on insurance companies structurally seeking income.

Third — and this is the part that probably goes under the radar for most international investors — regulation has mandated it.

As early as 2008, the CSRC mandated that listed companies seeking equity refinancing must have distributed at least 30% of average annual profits as cash dividends over the preceding three years. In December 2023, the CSRC revised its Guideline No. 3 on cash dividends, strengthening disclosure requirements for non-dividend-paying companies, simplifying interim dividend procedures, and encouraging higher payout frequency. In 2024, it went further: the November Guidelines for Listed Companies No. 10 — Market Value Management explicitly charged company boards with actively managing their market capitalization, through dividends, buybacks, investor relations, and M&A. Capital return is now a governance expectation, not a voluntary option.

The results are showing up in the data. Listed onshore Chinese companies (A-shares) paid a record 2.64 trillion yuan in dividends in 2025, surpassing the previous record of 2.4 trillion yuan set in 2024 [*]. Share buybacks have also seen a massive structural leap. In 2025, 1,495 A-share companies initiated share buyback programs, with the cumulative value reaching 142.84 billion yuan.

More importantly, the nature of these buybacks has fundamentally shifted. Moving away from traditional repurchases for employee stock ownership plans, cancellation-oriented buybacks (aimed at reducing share capital) increased markedly. In 2025, over 40% of all buyback plans were intended for full or partial cancellation, up from 38.33% in 2024 (wind).

The policy tailwind has only grown stronger. The 300 billion yuan re-lending facility launched by the PBOC in October 2024 was further optimized in May 2025. It is now part of a combined 800 billion yuan pool (shared with the Securities, Funds, and Insurance companies Swap Facility), specifically designed to provide high-velocity liquidity for buybacks and major shareholder stake increases [*].

This is a coordinated policy push, not a corporate governance fad. The combination of regulatory mandate, suppressed domestic rates, and a conscious SOE pivot toward shareholder return has created a structural backdrop that simply didn't exist in prior China market cycles.

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The quasi floor: A mechanism worth understanding

Here’s something we don’t see getting nearly enough attention in international coverage of China equities.

Under CSRC rules finalized in May 2024 — the Interim Measures for the Administration of Shareholders’ Reductions in Holdings — controlling shareholders and de facto controllers of listed companies are prohibited from reducing their holdings via secondary market transactions if any of the following apply:

• The stock price has fallen below its IPO price

• The stock price has fallen below net asset value per share

• The company has not met dividend standards — specifically, cumulative cash dividends over the prior three years amount to less than 30% of average annual net profit

This creates what we’d call a quasi price floor. Not a hard floor — the state isn’t pledging to buy at a specific level. But a real incentive structure: a controlling shareholder who wants the optionality to monetize their position needs the company’s stock to stay above IPO price and NAV, and, most importantly, needs the company to maintain its dividend. That incentive doesn’t go away.

The practical effect is subtle but real. Companies with genuine cash generation are increasingly motivated to maintain and grow dividends — not purely because regulators want them to, but because their controlling shareholders’ own exit flexibility depends on it.

Instruments to invest in Chinese dividend stocks

In the domestic A-share market, the CSI Dividend Index (000922) serves as the foundational benchmark. By tracking 100 of the most consistent dividend payers—those with at least three consecutive years of distributions—and weighting them by yield, it provides the most direct exposure to the theme. It is the baseline for the "income trade," currently yielding roughly 5.2%.

For the Hong Kong market, Global X Hang Seng High Dividend Yield ETF (03110.HK) is a good direct exposure, now yielding around 5.5%-6.5%.

What’s wrong with the existing benchmarks?

To be fair, these benchmark indices are solid instruments for broad exposure to the theme. Looking at the price history over the past decade, they have generally delivered price returns on par with the CSI 300, with dividends adding an additional layer of outperformance. In a persistent low-rate environment, these remain reasonable tools for asset allocation and income generation.

However, they do carry structural shortcomings that investors should consider:

1. Sector concentration

The CSI Dividend Index is structurally heavy in banks, coal, and energy. These sectors dominate on raw yield metrics: state banks provide consistent payouts, and coal companies have generated enormous cash throughout the recent commodity cycle. But a basket where banks alone can exceed 30% is not a diversified income strategy. Telecom, utilities, industrials, and selected consumer names all have robust dividend-paying businesses that often get systematically underweighted in these frameworks.

2. Over-reliance on “trailing yield” as a screening criterion

A high trailing dividend yield can signal three very different realities: a genuinely high-performing business, a collapsing share price, or a one-off special dividend that won’t recur. Index methodologies (such as the CSI Dividend Index) that place primary weight on trailing yield often fail to distinguish between them.

3. Absence of financial quality filters

Some companies sustain dividends by borrowing—a practice that is a risk, not a feature. Methodologies that don't filter for fundamental indicators—such as free cash flow quality, ROE, or earnings durability—effectively hide balance-sheet risk under an "income" label.

These issues are partially mitigated by more advanced index variants. The CSI Dividend Low Volatility Index (930955), for example, filters for stocks that pair high payouts with low price volatility, acting as a defensive anchor during market turbulence. For investors wary of "value traps," the CSI All Shares Dividend Quality Index (932315) overlays financial health indicators—such as net profit growth and ROE—alongside yields. This ensures that distributions are backed by genuine fundamental strength rather than depleting cash reserves. (This methodology results in much more diversified sector concentration; currently, Food & Beverages, Non-ferrous Metals (15.97%), and Autos occupy the top positions.)

4. Buybacks are excluded entirely

Perhaps the most significant flaw is that buybacks are excluded entirely from all major indices. While this is understandable given that the relevant policy changes are recent, we believe a "mindset shift" is now required: moving from a "dividend-only" view to a Total Shareholder Return (TSR) view.

Buybacks are now a core component of how Chinese companies return value. Indices that screen only for cash dividends miss this shift completely. A company running an aggressive buyback program—which supports the share price and increases earnings per share (EPS)—could be ignored by the index entirely. In the current regime, the old methodology is only looking at half the picture.

For instance, as China’s internet giants transition from hyper-growth stories to mature, cash-generative companies, they have increasingly leaned on buybacks as their primary tool for returning value. Tencent, for example, has committed to a massive share repurchase program in recent years; while its cash dividend yield typically hovers at a modest 1.5% to 2%, its "buyback yield" provides a much more substantial contribution to total shareholder return.

A-share screening: total shareholder yield

To get a more comprehensive picture of what companies are actually returning to shareholders in the A-share market, we conducted a systematic screening exercise. Rather than relying solely on trailing dividend yield — which is how most mainstream dividend indices rank their constituents — we incorporated buyback activity alongside dividends to arrive at a more complete measure of total shareholder yield.

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19 investors, family offices, and entrepreneurs from the US, Germany, South Korea, Malaysia, and Australia (including one returnee from our first tour) joined us for a 2.5-day, event-packed tour that included conversations with founders and C-suite of:

• Minimax (0100.HK), one of China’s leading AI players

• Black Lake Technologies, China’s leading manufacturing AI company (a day before they officially announced their Unicorn-status Series-D fundraise)

• Fourier Robotics, a leading robotic maker with roots in healthcare exoskeleton

• A conversation about the future of autonomous driving with an angel investor of Pony.ai, one of China’s leading L4 robotaxi companies, followed by a test ride

• A frank presentation by Baiguan’s tech lead on the pros and cons of various domestic and foreign AI models from a user’s perspective.

• A visit to the Shanghai Foundational Model Center (SMC), a leading incubator of Chinese AI startups, with presentations by Cyber Partner (robotics implementation specialist), IO-AI Tech (robotics data collection), Nieta (AI-native virtual characters), and Investmate (AI-native personal finance tool)

There are many takeaways from our participants. Here are the top 5 common ones I find.

#1 A new generation of entrepreneurs and local talents has finally arrived

Most of the participants are very impressed by the startup founders we have met. One participant, who used to work as a senior executive at a Mag7 firm, told me this cohort of Chinese founders was very different from what he was used to.

One unique feature this time was that every founder we met this time spoke fluent English, so we didn’t even bother with translation software or hiring a translator. Perhaps this was because we limited this tour to Shanghai, China’s most cosmopolitan city, but I promise this was not by design.

Being English-speaking does not mean China is relying more on overseas talents, though. One participant was concerned that recent US restrictions on foreign college students would stifle innovation in China, only to find that, in fact, most of the talent (and founders) in China’s leading AI companies (Minimax, Moonshot, DeepSeek, and Zhipu, etc.) are locally educated and trained.

Therefore, speaking English or not is not the real differentiator of this generation of talents. A senior executive from Minimax commented that the unique feature of this new generation of founders is their self-confidence, which stems from their having read and studied the same things at the same pace as their global peers.

#2 Autonomous driving: technology is ready, but policymakers are balancing the medium and long-term

We invited an early investor of Pony.ai and received a comprehensive review of the past and future of autonomous driving in China. The core conclusion was the same as ours 2 weeks ago: the technology is ready, yet Beijing is juggling between the short-term policy pressure arising from unemployment and the long-term necessity coming from a rapidly aging population.

As a result, Beijing is adopting a “do but don’t shout” approach, encouraging localities to keep rolling out pilot zones, preserving an overall supportive environment for the industry while also deliberately putting a lid on mass media coverage and debates.

Some US guests found this conclusion counterintuitive. One private investor who came from Miami, where Waymo already had a big presence, expected China to be pursuing robotaxis aggressively and was thus surprised by the apparent conservative attitude.

This conclusion was also corroborated by our own test ride experience.

In a slightly laughable episode, our group started hailing robotaxis at a location that was too remote and too sparsely populated. Consequently, on average, we waited around 10 minutes for a robotaxi, which took another 15-20 minutes to arrive and pick us up.

This was a major embarrassment for the us the organizers, but our wonderful participants, laughing and lively chatting with each other while standing by the roadside, found it an informative footnote to the authentic state of robotaxis in China.

#3 Robotics: solving the data bottleneck

By now, it’s common knowledge that despite the hype about humanoids in China, we haven’t really solved the “big brain” problem yet. The robots can perform specific, pre-designed tasks, but their capabilities are not sufficiently generalized.

In short, the body has outpaced the brain.

A key bottleneck to achieving the “big brain” problem is the lack of training data, and a “bottleneck”, in the context of today, represents opportunities.

That’s why we were amazed by a presentation by IO-AI Tech, a startup that’s laser-focused on collecting human-centric data for its clients.

Moreover, at the data collection center in one of the robotics firms, where we were not allowed to take photos, we saw an army of engineers physically train robots to do housework (such as picking up fruits and closing wardrobes) by repeating the action over and over again using remote grippers. We debated among ourselves whether this type of training is efficient and whether simulated training is obviously a better way to collect data.

On the other hand, we also wondered whether this inefficiency can actually be “good,” and whether human trainers for robots are the present-day assembly line workers, providing a crucial employment cushion.

#4 Manufacturing is China’s key strength

If data is the key to achieving the big robotics brain, then China, with its strong manufacturing base, clearly has an advantage in mass-producing robots to collect more data.

A key highlight of this trip was our visit to Black Lake Technologies, which specializes in cloud-based manufacturing execution systems and collaborative platforms for the manufacturing sector. Founded in 2016 and headquartered in Shanghai, the company is often cited as a pioneer in bringing “consumer-grade” internet technology to the traditional factory floor.

The company was co-founded by Yuxiang Zhou, a former Wall Street banker. His leadership story is well-known in the Chinese tech scene. After an initial startup failure, he famously spent time working on factory floors to understand the real-world pain points of manufacturing workers before launching Black Lake.

Last year, Yuxiang became one of the very few CEOs of a medium-sized company to attend Premier Li Qiang’s symposiums. To be sure, Black Lake is not Xiaomi or BYD, and there are tens of thousands of startups of a similar size in China, so its presence at such a high-profile symposium is living proof of the importance of manufacturing to China’s decision-makers.

#5 A new private-public partnership is emerging

This brings us to the role of the state, a subject no tour to China can bypass.

The relationship between the private and government sectors is an implicit theme in this tour.

On one hand, as seen in the autonomous driving sector, shrewd and conservative regulatory policies have acted as a bottleneck for mass commercialization.

On the other hand, the state-run SMC incubator in Shanghai demonstrated an aggressive pro-growth stance, providing free rent, subsidized AI compute tokens, and streamlined regulatory 'concierge' services.

As the economic engine pivots from a government-centric real estate model toward private-sector-led innovation, we are witnessing a 'new normal' for governance: the most successful local authorities will be those that act as support platform providers rather than central planners that meddle.

Future tours

After two successful tours, we at Baiguan are now confident in our ability to deliver in-depth, highly memorable business-themed study tours for a global audience.

In the future, we plan to partner with more vertical experts and host more specialized theme tours across sectors such as biotech, energy, manufacturing, and high-end consumption.

Our ultimate vision for this is that whenever you come to China for something else (such as a business conference), you would consider checking Baiguan’s event calendar to see whether you can fit an enriching tour into your itinerary.

Stay tuned!

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Last month, we launched Baiguan Pro—our monthly view on Chinese assets, themes, and sectors we are closely following, as well as insights from our own data at BigOne Lab.

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 to this email with the address associated with your subscription.

This Month: Our View on Chinese Assets

Our directional view on China equity allocation remains consistent with last month. Importantly, our proprietary China Resident Risk Appetite Index (CRRAI) shows continued improvement in Chinese households’ risk appetite.

In the March 2026 reading, the CRRAI composite index recorded -0.08, a further recovery from -0.17 in February. This marks several consecutive months of improvement in resident risk appetite, which is now just a fraction away from the 0-line (the historical mean/neutral level).

Recent data also shows that foreign institutional investors’ confidence in allocating capital to Chinese assets has entered a phase of stabilization following the volatility seen in late 2025. While the Sentiment Index for A&H Shares retreated slightly from its March peak of approximately 0.54, it continues to hold steady above the 0.50 neutral threshold, ending April near 0.51.

These data points back up our confidence in Chinese assets.

A-shares still preferred over HK. Three specific reasons: (1) the national team floor mechanism is a genuinely unusual feature with no real global analog; (2) in an elevated geopolitical risk environment, A-shares’ domestic-anchored dynamics offer more insulation from global risk-off moves; (3) the composition of A-shares — AI and tech supply chain, heavy industrials, domestic manufacturers — is a better fit for the China themes we find most compelling right now versus HK.

That said, our team has been increasing exposure to Hong Kong-listed assets.

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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.

If you missed our launch piece, you can read it:

As a thank-you to our existing paid subscribers, we are offering a complimentary upgrade to Baiguan Pro (offer ends on June 30, 2026). If you’d like to take us up on that, simply reply to this email — we’ll get you sorted.

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In Today’s Data Update

We are updating four sectors that we recently wrote about in the Baiguan newsletter, with BigOne Lab’s proprietary data as of March 2026:

• Sportswear & Footwear: We previously highlighted how the rise of the “athleisure” trend and robust discretionary spending on sports and health in China are driving organic growth.

• Luxury Goods — We previously noted that luxury goods are seeing a gradual comeback in China as sentiment improves among middle-class and affluent consumers. In particular, Laopu Gold and the broader gold jewelry sector deserve close attention.

• Pop Mart — We previously detailed why we believe the IP sector is one of the best business segments in China and discussed Pop Mart’s valuation.

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

🔒 The following content is available to Baiguan Pro subscribers.

1. Sportswear & Footwear | March 2026

Bottom line: March growth moderated from the elevated January–February base, but Q1 as a whole delivered meaningful sequential acceleration versus Q4 — particularly for integrated brands and running shoes.

January–February’s strong performance was shaped by a confluence of one-offs: delayed winter demand from a warm December, the Chinese New Year week pull-forward, and Winter Olympics-related brand exposure. As those tailwinds faded, March growth naturally cooled. But stepping back to Q1 as a whole, the sequential improvement over Q4 is real across the board:

FILA’s acceleration to +16% is the standout. Nike remains the outlier — Q1’s -16% shows no meaningful improvement over Q4’s -18%, consistent with continued weakness at the distributor and retail level.

Performance Apparel: Divergence Opening Up

March brought a visible slowdown for Amer Sports: +20% YoY, down from +29% in January–February, with Q1 at +27% versus Q4’s +37%. Descente (+29% in March, broadly in line with Q4’s +31%) and Lululemon (+22%, versus Q4’s +26%) are both holding pace well.

Running Shoes: The Standout Growth Story

Running shoes remain the cleanest high-conviction trend in our sportswear data. Despite a modest March moderation, Q1 figures are striking:

On Running and HOKA both accelerated in Q1 — this is not a base-effect story, it reflects genuine share gains in a Chinese running shoe market that continues to trade up.

2. Laopu Gold & Gold Jewelry | March 2026

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