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

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In Today’s Data Update

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

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

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

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

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

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

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

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

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

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

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1. Luxury brands

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

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

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

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

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

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

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

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

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

Why State Grid wants to spend RMB 4 trillion

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

Permitted return = effective assets × permitted return rate

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We must be highly selective on sub-sectors.

What we are selecting for

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

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

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

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

The absorption problem

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

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

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

Two things follow.

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

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

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

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

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

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

Theme one: Ultra-high voltage

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1.The August decline was not simply about “foreign capital leaving China”

There is a common view that China’s capital markets and other emerging markets have a seesaw relationship, especially with tech-heavy markets such as South Korea and Taiwan. When those markets fall, capital rotates into China; when they rebound, capital flows back out. This is also one reason why indices such as EMXC (Emerging Markets ex-China) exist.

Why? Some argue that it comes down to AI exposure versus a lack of AI exposure—in other words, that Chinese companies do not have enough AI. I also think this conclusion is wrong, and I will come back to that later.

The reality, however, is that genuine foreign inflows into China’s A-share market have already become very limited, while incremental capital in Hong Kong has mainly come from mainland China through southbound flows. Even in July, I did not see strong interest among foreign investors in increasing their China exposure. If anything, they continued to stay underweight. Based on my conversations with institutional investors, the two investor bases may overlap far less than people assume. Put simply, many investors are just not interested in China and are not paying much attention to it.

If they never really came back, they could hardly be “leaving” again.

The pessimism in August was not mainly about investors focused on the US, Japan, South Korea, and Taiwan suddenly turning bearish on China again. In my view, the reasons were much more specific to Chinese companies themselves than to the external environment or global sentiment. I will focus mainly on Chinese companies listed in Hong Kong and the US, because they illustrate the point more clearly. After all, foreign investors still face certain barriers when investing directly in A-shares.

2. Chinese companies’ second-quarter results were actually not that bad

Looking at the second quarter alone, many companies broadly met expectations. They were not strong; they were simply in line with already-low expectations. Tencent, Alibaba, Meituan, Xiaomi, Kuaishou, and others broadly maintained the trends seen in the first quarter, and their core businesses did not collapse. Because China’s consumer and e-commerce activity is extensively tracked by third-party data providers, the market already knew that the second quarter would be fairly weak. There was therefore no major rebound in expectations; companies were simply grinding forward against a low-expectation backdrop.

Some companies even came in slightly above expectations:

1. Take JD.com. As spending on food delivery declined and losses narrowed, the rebound in profit was clear. Adjusted net profit rose 21% year on year to nearly RMB 9 billion.

2. Take Meituan. The market had originally expected the company to remain loss-making throughout 2026, with the food-delivery business not reaching a quarterly profitability inflection point until 2027. But in reality, the food-delivery business had already turned profitable in the second quarter this year. The company as a whole reported more than RMB 2 billion in adjusted net profit in Q2—it made money. It is also expected to remain profitable in the third quarter, meaning the inflection point arrived roughly six months earlier than the market had generally expected.

3. Take Xiaomi. In investor communications, the company explicitly mentioned that “the rise in memory-chip prices is slowing,” which matters because memory has been one of its biggest sources of cost pressure. In addition, according to my channel checks, smartphone makers including Xiaomi and OPPO rejected Samsung’s request for a substantial increase in memory prices. Why did they have the confidence to push back? Because they now have a backup plan: China’s ChangXin Memory Technologies has already become the world’s fourth-largest memory-chip supplier.

There are many other examples like these. Taken together, they suggest that the financial condition of Chinese companies in the second quarter was broadly stable.

3. But will the third quarter of 2026 be worse?

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Before today’s post — a quick note. Applications are open for the 2026 Autumn Baiguan China Tour, a month-long “marathon” of modular expeditions across October and November: Robotics & AI in Beijing, advanced manufacturing from Foshan to Shenzhen, the next energy cycle across Shanghai–Suzhou–Hangzhou, and premium consumption in Shanghai — plus weekend immersions in Datong, Yiwu and Nanjing. Early-bird pricing through September 13.

Market commentary: the August tape

August brought the bulk of Q2 reporting, and the pattern was consistent: results were broadly fine, but guidance was poor.

Hong Kong gave back July’s gains, and in our reading the proximate cause was capex. The large platforms disclosed heavy AI spending, and the market immediately asked what the return on it looks like. China is running out of phase with the US here: global investors are now interrogating AI capex ROI, and that is precisely the moment Chinese companies have begun to spend. An already-cheap market took another leg down.

The extreme sentiment can be read off individual names. For instance, Kuaishou has fallen to roughly the level of its cash, with the value ascribed to Kling now close to nil — a revenue-generating business that the market has effectively decided is worth nothing. That was the mood of the Hong Kong market.

But there could be upside surprise worth watching. Open-source models keep taking global share from closed-source ones, and the large majority of those open-source models are Chinese. We cannot say when this turns, but if the narrative shifts to Chinese open-source models capturing a meaningful slice of the global token market, that is a genuine re-rating catalyst — and it would make today’s levels an entry point rather than a warning.

Given the macro, we would frame China less as an allocation to “the Chinese market” and more as an allocation to a handful of strong sectors within it — and at the index level, we do not see much comparative advantage at this time of the year. We will expand this in today’s monthly view below.

Aaron from our team will follow up later this week with a separate market commentary that goes considerably deeper on the August selloff — what it was and was not about, where the Q3 guidance pressure is concentrated, and the non-consensus case for where the upside surprise could come from.

Our Views This Month

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Before today’s post — a quick note. Applications are open for the 2026 Autumn Baiguan China Tour, a month-long “marathon” of modular expeditions across October and November: Robotics & AI in Beijing, advanced manufacturing from Foshan to Shenzhen, the next energy cycle across Shanghai–Suzhou–Hangzhou, and premium consumption in Shanghai — plus weekend immersions in Datong, Yiwu and Nanjing. Early-bird pricing through September 13.

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

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In Today’s Data Update

China’s two-speed economy continues. In H1, goods sales rose just 1.1% while services rose 5.3%. Exports and industry have held up; the household wallet has not. July brought further pressure, as a historic run of typhoons disrupted foot traffic and an equity market in deep correction weighed on sentiment among consumers who were already cautious.

In today’s Data Update, we look at the most recent data to see how consumer brands are holding up in a softer domestic consumption environment. In particular, we examine LV’s July sales — the first full month after its trademark lawsuit against local tea brand Molly Tea won in court but lost the Chinese public.

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

• Luxury goods: which brands kept growing through a soft July and which did not — and whether the split is better explained by the overall economy or specific brands.

• Gold & jewelry: Laopu’s July print, set against a choppy gold price and a thin promotional calendar outside SKP. We also read the secondhand market, where transaction volumes and premiums say something about who still believes in the price.

• Tea & coffee: delivery platforms are pulling back their subsidies. We look at what that meant for third-party delivery sales in July, normally the peak summer month, and at how brands funding their own in-store discounts, such as Luckin and Guming, fared against those that are not.

• Pop Mart: we update July’s year-on-year growth and what the collab-heavy 2026 slate means for Pop Mart’s IP concentration risk.

• Sportswear & footwear: a traditional low season with no holiday catalyst, and typhoons disrupting outdoor demand. We look at brand-by-brand performance, particularly whether Lululemon’s completed fiscal Q2 (May–July) supports management’s mid-to-high-teens China guidance after the Great Wall drum scandal.

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. Luxury brands

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Bottom line: luxury sales in July were broadly weak and worse than June for most categories. Accessible-luxury and American brands kept compounding; European megabrands mostly fell back, with LV the sharpest drop.

Still compounding: Coach grew primarily through higher prices, with average spend per transaction up 23% and unit volume up 7%, showing that new product lines are attracting customers. Ralph Lauren saw the opposite pattern, driving growth through volume, which rose 54%.

Hermès, Zegna, and Brunello Cucinelli remained positive but slowed down sharply. This suggests that while recent economic jolts had an impact, their core high-net-worth customer base remains strong.

Louis Vuitton: Offline sales plunged from -17% in June to -40% in July. This drop far outpaced peers, whose performance worsened by 2 to 14 percentage points over the same period (e.g., Gucci fell to -13% from -1%, Moncler to -26% from -12%, and Dior to -14% from -8%).

The decline was volume-led (unit volume -37%), showing that fewer customers visited rather than existing shoppers trading down. Coming right after the Molly Tea verdict and the viral “toilet bag” meme, this provides clear evidence of a direct reputational hit in China.

2. Gold & jewelry

Bottom line: Laopu’s sales drop worsened significantly—driven by a drop in unit volume, not lower average spend. The rest of the jewelry market also softened, pulling aggregate growth for the top four brands down to zero. Gold price volatility, the July equity drawdown and typhoon-disrupted foot traffic all contributed to the weak sentiment.

Laopu Gold. We estimate July mainland store sales (ex-SKP, region-adjusted) fell 51% year-on-year, a wider decline than both June and Q2.

Two drivers:

1. Fewer buyers. Customer count -52%, units -54% — both worse than June.

2. A thin promotional calendar outside SKP stores. Beyond the Shanghai Xintiandi store relaunch and the Hangzhou MixC summer offers, non-SKP stores ran few discounts in July.

The secondhand market read: July transaction volume for Laopu pure-gold pieces fell noticeably month on month. The average realized price was RMB 1,115/gram, a 26% premium to the spot gold price in the transaction week — narrower than June’s RMB 1,219/gram and 29% premium.

The rest of the category decelerated too: The four-brand aggregate (Laopu, Chow Tai Fook, Chow Sang Sang, Chao Hong Ji) fell from +12% to roughly flat. High-end jewelry stayed under pressure.

3. Tea & coffee

Bottom line: Industry growth slowed in July, driven entirely by a drag in third-party delivery as subsidies faded. While in-store sales held up well, competition intensified: aggressive brands like Luckin and Guming accelerated growth (up 73% and 61% YoY) by funding their own store-level discounts, while non-discounting brands lost market share.

Mixue's sales growth slowed in July (2% YoY vs. +9% in Q2), weighed down by both in-store and third-party delivery. Similarly, Chagee's overall performance remained weak in July (-16% YoY vs Q2’s -13%), due to a lack of in-store recovery and decelerating delivery sales.

4. Pop Mart

Bottom line: July offline sales grew +35% YoY (up from +13% in June), but the jump is a base effect rather than a recovery. June 2025 was the peak of LABUBU’s global breakout, and July 2025 cooled from there.

New Product Performance: The DIMOO × PIXAR release sold steadily into the summer. While its launch-day peak was Pop Mart’s highest in two months, it did not reach the hype of the Twinkle Twinkle × McDonald’s Children’s Day drop.

At the same time, the Twinkle Twinkle IP is losing momentum and may be losing market share to Miniso’s in-house IP, YOYO. Miniso hosted a six-city YOYO pop-up tour from July to August and expanded into ice cream and desserts, directly copying the strategy Pop Mart built around Twinkle Twinkle.

The acceleration in collaborations is the most notable shift in 2026. Nine proprietary-IP × external-IP collaboration series launched in the first seven months (vs. three in the same period of 2025), with the licensing matrix expanding from Disney, One Piece and Crayon Shin-chan to Sanrio, FIFA, PIXAR and My Little Pony, alongside the addition of celebrity IP (Aespa, Leah Dou, YUQI).

This is the diversification we have been watching for, and it does lower single-IP dependence. But licensing costs are rising with it, so the margin on each incremental sale is thinner than it used to be.

August is expected to be harder, since mini LABUBU (8/28) and the Twinkle-Twinkle Sweet Dreams Forecast (8/21) both launched a year ago. Overall, base pressure should ease materially from September, with September–November a relatively favorable comparison window.

5. Sportswear & footwear

Bottom line: June’s weakness carried into July. It is a traditional low season with no holiday catalyst, and the typhoons hit the outdoor-weighted brands specifically. Most integrated brands saw declines widen or stay negative; adidas remains the exception. Lululemon’s completed fiscal Q2 now sits well below the company’s own guidance for China.

Integrated brands (own retail + major distributors):

Nike extended the weakness after the best performance in May (-12% YoY) and has weakened every month since. July average transaction (ATV) value fell 11%, likely reflecting heavier offline promotion, while volume fell 14% — Discounting to clear inventory is not buying any volume.

Anta Group is prioritizing price over volume across both brands. Anta’s main brand ATV rose 2% and FILA’s ATV rose 4% and has been positive year-on-year every month since the start of 2026, supported by the One FILA premiumization strategy.

Sportswear brands: Lululemon’s fiscal Q2 (May–July) offline store sales grew just +2% YoY—a sharp deceleration from +19% in previous quarters—after falling -5% in June and -4% in July. This points to a high risk of missing management’s mid-to-high double-digit guidance for China.

Running shoes: On accelerates while the rest cool. On remains the strongest name in our footwear coverage, with ATV up 4%.

Disclaimer: All content in Baiguan Pro is for informational purposes only and reflects directional views based on publicly available information and Baiguan's proprietary data. Nothing here constitutes investment advice or a recommendation to buy or sell any security. Please conduct your own investment research before making any investment decisions.

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This is the fourth deep dive of themes & baskets we are tracking, after China’s robotaxi, China Global Champions 30, and Total Shareholder Return. This one is about the shift from goods to experience, service, and digital consumption — why we think it is durable, why it is unusually hard to own, and the twelve-name basket we have built to track it.

In May 2026, China’s total retail sales fell 0.6% year on year — the weakest print since the post-reopening period began in 2023. Read on its own, that number describes a consumer who has given up.

In the first half of 2026, Chinese residents took 3.46 billion domestic trips, up 5.4% [*]. Box office revenue recorded RMB 30.4 billion, up 9.4% — and inside that, RMB 17.1 billion went to concerts and festivals above 5,000 seats, up 17.7% [*]. They spent RMB 188.5 billion on gaming, up 12.2% [*].

Service retail grew about 5.3%; goods retail grew about 1.3%. The gap between them is the whole thesis: it has now widened for four consecutive reporting periods, which is long enough to stop calling it a durable trend.

Where the money went

The National Bureau of Statistics (NBS) service-retail breakdown for H1 2026 is clear about where the growth sits:

Catering — the biggest services category, and the one with the most listed vehicles attached to it — is unfortunately dragging the average down.

The spending is landing in three different-looking places that turn out to be similar behavior.

Great demand came from people’s desire to go out of the house: to be somewhere and experience something. This contributes to the burgeoning market for tourism.

Spending also went into content and screens. The gaming numbers deserve a second look, because the headline hides the interesting part. According to the CADPA industry report released at CDEC on 30 July, domestic game revenue grew 12.2% in H1 2026 while the user base grew 0.82% to 684 million—revenue grew because existing users paid more. PC and client games up 27.9%, mini-program games up 36.0%, with in-app purchases up 38.1% and now two-thirds of that segment’s revenue.

The same pattern appears in long-form audio, a market that grew roughly 15% to around RMB 28.7 billion in 2024 and is estimated to have reached the low thirty-billions in 2025, with Chinese podcast listeners at 134 million and forecast to approach 180 million by 2027 — of whom nearly two-thirds are between 21 and 35, and most say they subscribe for substance rather than background noise. As “paying for knowledge” becomes a rising trend, durable subscriptions on music and streaming platforms are increasingly generating recurring revenue.

Some spending went into IPs and personal interests. Pop Mart’s revenue grew 184.7% in 2025 and another 75–80% in the first quarter of 2026, with China alone doubling. That is a single company, but the category around it is broader — guzi retail, card games, IP toys, IP-licensed collaborations. Purchases of these products are driven purely by interest, and the object has almost no functional utility at all.

Our previous piece about the emerging “Guzi economy”:

Three destinations, one behavior: people paying for meaning, interest, and identity rather than for objects and utility. The fan who buys the album also buys the membership tier that grants priority ticketing, then the ticket, then the merchandise at the venue.

A trend that mostly isn’t listed

We intend to construct a theme basket to track this structural trend, but do acknowledge that many fastest-growing sub-sectors are simply not investable via listed instruments at this stage. For instance, museums, scenic, and cultural sites are overwhelmingly administered pricing, and concerts and festivals are dominated by private, unlisted operators. And the long tail of new formats, from escape rooms and script-murder to live-houses and immersive theatre, is spread across hundreds of thousands of SMEs.

What is listed sits at the platform level: ticketing & booking platforms, hotel franchisors, and OTAs. They mostly don’t create the experience, but they benefit from this broader trend.

We aim to explore four subcategories that directly benefit from this trend. We define “experiential” spending as capital allocation that is:

• Chosen by the consumer, not obligatory.

• Purchased for identity, passion, or experience—not pure utility.

• Reflected in corporate core business models. We ensure each candidate company’s revenue mix genuinely captures this structural shift.

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

In other words, the core question is not “which of these individual names will outperform,” but rather: given the scarcity of pure-play secondary market names, what is the most accurate listed expression of this shift available today?

Companies we are watching

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Macro Check

In June, household risk appetite reversed part of the prior rebound and pulled back below neutral. The recovery channel is still intact, but it now leans heavily on capital-market sentiment while macro liquidity and fundamentals continue to drag.

China Resident Risk Appetite Index (CRRAI)

Following May’s rebound to -0.06, the June 2026 CRRAI composite pulled back to -0.20 — a -0.14 move on the month and -0.10 over three observations.

At the 36.5 historical percentile, the index is consolidating below neutral. The composition is asymmetric: Capital Market Sentiment stayed positive at +0.77, but Macro Liquidity & Business Confidence (-0.67) and the Fundamental Bedrock (-0.45, dragged by housing and employment proxies) still cap the broader recovery — leaving the composite more exposed to any equity-market reversal. Household Leverage & Credit Dynamics is close to neutral at -0.17, but not yet strong enough to offset the structural drag on its own.

Our Views This Month

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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.

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

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

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

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

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

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

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

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

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The upper-left quadrant: profit leaders

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Profit support is not the same as bottleneck power

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

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

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

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

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

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

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In Today’s Data Update

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

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

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

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

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

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

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

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

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

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

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

FIGURE 1

Historical Export Power Peaks

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

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

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

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

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

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

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FIGURE 2

China Global Champions 30

What Did We Find?

The result was more interesting than we expected.

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

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

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

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

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

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

FIGURE 3

Category Revenue Mix

FIGURE 4

Overseas Revenue Share by Group

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

FIGURE 5

Overseas Revenue and Growth by Group

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

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

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FIGURE 6

Kantar BrandZ Global Top 20 Brand Value Mix

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

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

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

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

FIGURE 7

China Versus U.S. Manufacturing Share

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

Here the picture changes completely.

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

FIGURE 8

Top-30 Equal-Weight Stock Index

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

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Macro & Sentiment Check

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

1. China Resident Risk Appetite Index (CRRAI)

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

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

2. Institutional vs. Retail Sentiment

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

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

Our Views This Month

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

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

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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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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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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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 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.

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1. Sportswear & footwear

Bottom line: April marks a clear sector-wide reacceleration, with outdoor emerging as the headline growth story alongside continued strength in athleisure and a broad-based recovery across running and integrated brands.

According to our online sales table across major e-commerce platforms:

Outdoor: The standout — acceleration across the board

Outdoor remains the cleanest high-conviction trend in our sportswear data, with virtually every brand we track posting sequential acceleration in April. By category, outdoor apparel and outdoor footwear posted +57% and +47% YoY, respectively (vs. +28% / +41% in March).

Arc’teryx continued its strong run at +39% (vs. +33% in March and +20% in Q1), Kolon delivered +72% (vs. +57%), and Descente accelerated to +48% (vs. +21%). Among more value-tier outdoor players, Camel posted +41% (vs. +10%), Kailas +37% (vs. 0%), and Pelliot +26% (vs. +20%).

Integrated brands: improvement almost everywhere, with Li-Ning the exception

Among domestic integrated brands, most names improved: Anta +2% (vs. +1% in March), FILA +21% (vs. +7%). Li-Ning was the outlier, slipping to -5% (vs. +5% in March). Across the group, the improvement is driven primarily by volume; ASPs remain in single-digit YoY decline.

International integrated brands saw broad-based acceleration similarly. Nike returned to double-digit growth at +12% (vs. flat in March), helped by a strong reception of the new Pegasus and improved casual footwear.

Athleisure: Lululemon still Strong

Lululemon delivered +39% YoY in April — the late-April social media controversy about the toxic chemicals in the fabric has not yet visibly impacted the data, though we will watch May closely.

Running shoes: growth returns

Running brands rebounded in April after a softer March. On Running continued to outperform at +35% (vs. +17%).

2. Laopu Gold & gold jewelry

Bottom line: Laopu Gold’s April weakness continued at a pace similar to March, amid broader weakness in gold jewelry as the gold price rally reverses the trend seen in previous months.

Based on our offline payment data, Laopu Gold’s mainland China store sales (excluding SKP locations, on a region-adjusted basis) fell 23% YoY in April, broadly in line with March’s decline. The traffic story is what stands out: customer count was down 21% YoY, and order volume was down 32% YoY, pointing to clearly weaker buyer interest rather than a pure ticket-size issue. The May store-promotion ramp will be the key swing factor to watch.

Our social listening and daily transaction data suggest that gold price volatility has had a meaningful dampening effect on price-sensitive consumers, and that Laopu’s April promotional activity was insufficient to reignite their interest.

From our channel checks, May is expected to bring a broader promotional ramp across regions, with Shanghai and Guangdong rolling out ‘RMB 100 off per RMB 1,000 spent’ campaigns. We will be watching closely for the sequential lift this delivers.

Broader jewelry remains under pressure: Chow Tai Seng is the standout

With Laopu dragging on the category, total offline sales across the four gold jewelry brands we track grew +4% YoY in April (vs. +17% in March). Chow Tai Seng was the clear outperformer at +27% (vs. +24% in March) — the only brand to accelerate.

The high-end branded jewelry sub-segment remains under pressure on an underlying-demand basis. After a strong March (when a low prior-year base flattered comps), Bulgari turned negative to -10% in April (vs. +25% in March) as that base effect rolled off. Tiffany’s weakness extended to -15% (vs. -12% in March).

3. Luxury brands

Bottom line: Based on our offline payment data, the overall luxury market grew at a similar pace in April to March, but within-brand dispersion remained sharp. American/accessible luxury continues to be the standout, the high-end held its pace, and a subset of European brands deteriorated further.

Accessible & American luxury: sustained outperformance

Coach delivered another strong month at +34% YoY (vs. +32% in March), and Ralph Lauren maintained its torrid pace at +60% (vs. +61%). Both brands have now sustained high-growth trajectories for several consecutive months, and the consistency of the read across our data suggests these are durable share gains rather than promotional pulls.

Resilient high end: Hermès delivered +9% YoY in April (vs. +8% in March) — the most consistent performer in our luxury data, holding firmly in high-single-digit growth.

Still under pressure and worsening: Louis Vuitton deteriorated to -10% YoY in April (vs. -2% in March) — a notable sequential step down. YSL fell sharply to -23% (vs. -6%), and Richemont Group also slipped further to -7% (vs. -3%).

4. Pop Mart

Bottom line: BigOne Lab estimates April offline sales grew +37% YoY — a meaningful step down from March’s +58% — as a lukewarm new-product slate ran into a tough prior-year base (April 2025 featured Twinkle Twinkle Gen-2 and LABUBU Gen-3). Q2 base pressure persists for the rest of the quarter.

The headline April IP launches — the LABUBU x FIFA collaboration and ‘Flying LABUBU’ series, both plush pendants — underperformed March’s Sanrio collaboration. The mid-month *Twinkle Twinkle ‘Moon Gelato’ ****series *****release saw no notable launch-day spike in our daily sales data.

Secondary market: IP heat cooling

LABUBU Gens 1–4 are at a 30% discount to retail; Twinkle Twinkle Gens 1, 2, and 4 are at a 20% discount. Looking at Twinkle Twinkle’s series: ‘Sweet Dream Forecast’ and ‘Crush on You‘ trade roughly flat to retail. The new ‘Moon Gelato‘ commands a 12% premium — well below the 60% premium ‘Crush on You‘ commanded at its own launch.

Pucky’s ‘Knock Knock‘ series, Hirono’s ‘Road Journal’, and CRYBABY’s ‘Vacation Mode On‘ are the most resilient, trading within 10% of their retail prices.

Plush pendants: a margin offset

April saw 8 figurine blind boxes (+1 YoY), 3 plush blind boxes (+1 YoY), and a record-high 13 plush pendants. With plush pendant ASPs running 50–100% above standard plush products, the mix shift is a likely margin tailwind — an offset worth weighing against the softer revenue print.

Disclaimer: All content in Baiguan Pro is for informational purposes only and reflects directional views based on publicly available information and Baiguan’s proprietary data. Nothing here constitutes investment advice or a recommendation to buy or sell any security. Please conduct your own investment research before making any investment decisions.

Related Reads

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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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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