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

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

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

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

Two forces, one China-specific factor

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

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

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

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

Monday: CXMT begins trading

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

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

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

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

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

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

Why CXMT matters beyond China

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

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

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

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

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

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

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

Let’s first look at the ChiNext market.

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

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

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

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

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

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

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

Equipment and manufacturing held firm

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

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

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

The pricing map: huge divergence, freezing sentiment

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

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

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

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

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

and our latest check up after the market correction:

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

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

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

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

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

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

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

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

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

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

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

3/4 Households are still spending on services

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

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

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

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

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

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

Ending notes: possible 2H catalysts for consumer names

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

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

Disclaimer: For informational purposes only. Not investment advice.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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China’s token export playbook

There are two distinct export routes.

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

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

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

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

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

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

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

What holds it back

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

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

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

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

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

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

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

Investment implications

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

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

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

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

Where Does the Money Come From?

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

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

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

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

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

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

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

Enjoy!

Reconsidering Risk, Reward, and Allocation to China

By Enrique Becerra a.k.a

Why this article exists.

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

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

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

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

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

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

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

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

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

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

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

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

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

Part 1: A better understanding of Risk in China.

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

Below I examine five common China risk narratives:

• China is ultracompetitive, nobody makes any money

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

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

• Regulations move fast in China

• Taiwan

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

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

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

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

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

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

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

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

China Top 10 retailers EBIT (USD bn).

Competition? Big. Killing industry profits? Not necessarily.

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

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

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

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

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

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

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

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

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

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

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

Risk 4: Regulations can move fast in China.

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

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

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

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

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

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

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

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

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

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

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

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

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

Risk 5: Taiwan.

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

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

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

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

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

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

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

Wrapping up the risk section.

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

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

• Known-unknowns such as deflationary cycle and population contraction

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

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

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

Part 2: The Reward side of the equation.

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

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

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

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

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

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

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

Is this a surprise?

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

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

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

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

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

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

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

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

What’s the impact on online brokers like Futu?

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

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

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

What’s the impact on China ADRs

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

But these fears do not stand up to scrutiny.

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

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

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

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

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

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

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

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

Any other stones unturned?

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

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

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

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

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

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

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

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

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

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

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

Two possible stories could explain this:

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

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

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

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

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

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

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

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

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

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

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Last month, we asked: Is China’s Jan–Feb strength organic, or just stimulus? Two pillars are important for answering this question: the wealth effect (real estate) and income (salary). Through the week ending April 11, both still point up.

Real estate: activity broadens after the Chinese Spring Festival

Property viewings and transaction volumes are both tracking materially above their 2025 levels following the Spring Festival. Specifically, the transaction volume of second-hand homes has surpassed the peak following the 2023 Spring Festival, when a surge was driven by pent-up demand from COVID.

The recovery of the second-hand home transaction also seems even across city tiers:

The inventory level also improved materially across all city tiers, albeit at different paces. Using total listings / weekly transaction volume * 4.33 as a proxy (where 4.33 is just the average weeks per month), the average “months of supply” now trends down for every city tier post Spring Festival.

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Bottom line: the real estate recovery is widening, not narrowing. Although signs of a strong rebound are not in the near future (we see the listing price still trending down slightly or holding steady), real estate’s weight on the economy is decreasing.

In the previous post, we also observed from job posting data that the real estate and related industries (the orange area) saw their share of total recruitment cut in half, dropping from 15% in 2020 to less than 8% by the end of 2025.

Salaries: healthy growth in March

Average posted salaries on Chinese online recruitment platforms bottomed in November 2024 and have accelerated almost every month since.

March 2026 printed +5.7% YoY — the strongest reading since mid-2022 — with MoM momentum also picking up.

Two caveats: the data sample can skew toward while-collar roles. Additionally, the salary growth may not be even across industries. As we’ve previously pointed out (see Old to New), higher-paying “new productivity” jobs in tech and AI-adjacent roles are crowding out lower-paying ones.

But even after adjusting for both, a full year of accelerating wage growth is a meaningful break from 2023–24.

A note to readers: We recently launched Baiguan Pro, a professional tier for investors seeking more in-depth analysis directly related to Chinese equities. There, we share our team’s monthly view on Chinese assets, built on macro data points like these, along with other proprietary data and market inputs. If the Charts of the Week help you calibrate the China investment, Baiguan Pro takes it a step further.

Interested readers can read the inaugural post here.

Related Reads

As early as August 2024, right before POP MART’s shares really took off, we first commented on its stellar growth based on our own data.

In June 2025, took a deep dive into the consumer psychology around this company, including her own personal conversion as a consumer.

The stock price of POP MART recently had a major setback. After its annual earnings announcement, the stock has tanked by more than 30% over five sessions, wiping out around HK$100 billion in market value.

Three main reasons explained this market’s sudden lack of confidence. First, the market is concerned that the overseas business performed worse than expected. Second, there are concerns that POP MART relies too much on a single IP, namely Labubu (The Monsters). Third, Wang Ning, the founder and CEO, gave an ultra-conservative guidance of “no less than 20% growth” during the earnings release.

In the first half of 2025, overseas revenue skyrocketed 440% year over year. However, in the second half of the year, the overseas revenue growth rate “slowed down” to 243% year over year.

240%+ growth is certainly slower than 440%+ growth, but we can’t help but feel that calling this a “deceleration” runs the risk of nitpicking.

POP MART’s phenomenally explosive global growth story was a huge surprise for everyone in 2025. The market was naive to build a linear extrapolation of future growth rates from this level in the first place, and it is only natural to expect that, after such triple-digit hyper-growth, the company is bound to see some deceleration.

On the other hand, it’s important to note that China's sales have been remarkably robust and resilient. In the first half of 2025, Greater China revenue grew 135% year over year. In the second half, the growth rate remained virtually unchanged at 134% year-over-year. This demonstrates that China remains the main growth engine for POP MART, with strong and stable growth momentum that has not lost steam.

Our own proprietary data, tracking in-store transactions in China, also shows the growth rate in Q1 will be substantially higher than “no less than 20%”. (You can find the exact data behind the paywall.)

As for over-reliance on IP. It’s true that Labubu now accounts for 38.1% of total revenue, in 2025, up from 23.3% in 2024. However, the growth picture is more nuanced than it first appears. Labubu grew by 365.7% year-over-year, which is indeed the fastest growth rate among POP MART’s established IPs. Yet the company’s portfolio is diversifying rapidly. DIMOO grew at 205.3%, SKULLPANDA at 170.6%, and CRYBABY at 151.4%. More significantly, Twinkle Twinkle, positioned as the next major IP, grew at an extraordinary 1,601.6% year-over-year, from just 120.8 million yuan in 2024 to 2.06 billion yuan in 2025, now capturing 5.5% of total revenue.

If Labubu had not existed, you would still consider this company a high-growth one, if only with these IPs. An investor simply should not blame something for growing even faster than its fast peers.

We believe the real trigger for the big share price slump is the highly conservative “guidance” that Wang gave to the market.

Overall, POP MART grew 185% in 2025, reaching 37 billion yuan in total revenue. But now the management slapped a mere “20%” on the market’s face. A violent re-rating is only natural afterward.

According to Wang Ning’s explanation. It was a voluntary decision to decelerate and regroup internally after a “F-1-style” helluva ride. But the market is usually skeptical of such a statement. Is it a genuine choice to decelerate and regroup, or a just cover-up for a company that’s losing steam?

Regardless of the reason, it is certain that the company won’t pursue rapid growth in the near future. In a hot stock that has been dominated by long-short hedge funds, this is enough to scare many investors away.

At the same time, we start to see signs of super-long money coming into the scene. Duan Yongping, often dubbed as “Buffet of China” and a mentor of PDD’s Colin Huang, very publicly retracted his previous comment that he would not invest in POP MART, and praised POP MART as “right business, right people, and right price” and a “real precursor of the internalization of Chinese brands”.

It seems a rotation of investor types is underway right now.

Is POP MART valued correctly?

POP MART inspires many analogies. Back when it was a hot name, analysts often imagined POP MART would become the future Disney of China. While a closer analogy might be Japan’s Sanrio (8136.JP), creator of the Hello Kitty franchise.

We don’t believe POP MART is Disney or Sanrio, yet.

The crucial difference is that POP MART is still too young. By simple definition, when someone is young, they can’t prove that they are evergreen.

If you're looking for an analogy to understand POP MART, we think it's more like a video game company right now.

The situation is similar to Tencent Games back in 2017, when one super franchise, Honor of Kings, accounted for ~50% of its mobile game revenue. At the time, investors were also concerned about the sustainability of the situation.

Just like Tencent Games in 2017, POP MART has not yet demonstrated the longevity of the super franchise. On the other hand, the success and runway of each franchise are far from predictable. Even their own management cannot predict them. They also don’t have a long enough track record to prove that they can keep producing hit after hit.

Adding to the problem is that, so far, POP MART’s IPs lack narrative power. This is a key difference between POP Mart and Disney at this moment. Disney’s IPs have narratives and stories, while Labubus are storyless, making it even harder for investors to look ahead.

All of these mean that the current valuation of POP MART, at a low double-digit TTM P/E and even single-digit forward PE, is exactly where it should be.

Investors love linear extrapolation. Investors hate it when there is too much uncertainty, and they can’t perform linear extrapolation due to low visibility. POP MART is thus rapidly, violently gearing down from a high-growth, high-multiple story to a stable-growth, low-multiple value play that many institutional investors would not want to participate in.

Looking ahead over the next few years, we should focus only on whether the share price can be driven by actual EPS growth, and assume that re-rating will occur only after years, and even decades, of solid, healthy growth.

Even if you are a POP MART bull, this is the reality you have to be clear about.

So, should we expect POP MART to sustain long-term growth?

We think we should.

In fact, we believe if there is any company that is able to deliver a long-lasting enterprise value capitalizing on China’s (and the world’s) growing demand for high-emotional-value consumption, it’s got to be POP MART.

There are at least three reasons to support our conviction: people, platform, and attitude towards investors.

First, let’s look at it from a first-principle perspective: for a business as ephemeral and as unpredictable as that of POP MART, what’s the single most important factor to consider? Technology? Marketing capability? Cash?

None of that.

The single most important factor is people and culture.

This is not the first time that POP MART has faced a crisis. In fact, the “crisis” of today is far less significant than previous ones.

When POP MART IPOed in 2020, investors questioned whether the company relied too much on its main IP, Molly. There was the same debate over whether the business model worked and if the company could keep delivering long-standing IPs. Following that, the share price fell by more than 80% from its IPO price by 2023, before rising 30-fold over the next two years.

And even further back, POP MART had been building this unique and lesser-known business for more than a decade before its IPO. There weren’t many overseas models to copy. Many people do not understand the model. It’s not a red-hot sector with an existing roadmap to show them the way. They have always been lonely.

It’s also when Wang Ning developed the core tenet in his management culture: “Respect time, respect operations” (尊重时间, 尊重经营), which sounds very much like benfen of Duan Yongping and Pinduoduo.

Over the last 16 years, the company has proven it can survive cycles, find its own audience, and keep innovating on its own timeline and pace. They seem able to consistently make the right choices and are unafraid of being alone or singled out, which is a remarkable characteristic in Chinese business culture and society.

This is why we believe this current voluntary deceleration of growth in exchange for operational improvement is real, and not a cover-up for slow growth. It’s yet another sign that this company does not care about short-term performance but is squarely focused on the long term.

It’s also important to understand that “no less than 20%” is not “guidance” in traditional Wall Street speak. The “20%” number is the least Wang Ning thinks they can deliver with 100% certainty. Anything above is not planned for and will not be the focus of this year. It’s the equivalent of saying there is no quantifiable business target for this year at all.

It’s healthy that they are sober about where they are, despite the immense market expectations. This is the right way to do it, especially in a business that nurtures and manages intangible assets. Focusing too much on short-term financial metrics would only kill its soul.

The second reason for our confidence is that we should not forget that POP MART has already achieved incredible success, leaving it with a formidable moat that won’t be easily surpassed by copycats in the short term.

The most formidable asset is its brand. POP MART now has significant branding power, not just at the individual IP level but also at the company level, both in China and, very uniquely, worldwide.

This immense brand equity gives them a significant edge over copycats and competitors in their dealings with all stakeholders, not just consumers. For example, they have moved into prime real estate locations across China and in many parts of the world, ensuring that each of its new product lines and IPs will be the first for their consumers to encounter. They have also built a great reputation with designers and a strong connection with their core community, which gives them a real edge in continuing to produce new product lines.

Last but not least, despite POP MART’s long-term mindset, they also care about shareholder interests.

This is unlike PDD, which is also a very long-term-focused company but has never shown a commitment to boosting shareholder returns, the main factor driving PDD’s extremely low valuation now. Most people do not doubt that Pinduoduo is a superbly run company. But investors are concerned that if a company never cares about minority shareholders' interests, the very foundation of any financial modeling based on distributable discounted cash flows will be pointless.

POP MART is different: it has also proven itself to be an investor-friendly company. Whenever the share price dropped dramatically, it bought back shares aggressively. In the several trading sessions since its share price tanked, the company has already repurchased close to 1% of its total capital. An aggressive share buyback will also be part of POP MART’s path toward stronger EPS growth, alongside sheer profit growth.

The latest data

Behind the paywall, you will see the latest data from BigOne Lab, our parent company, about POP MART’s latest performance in China.

The data below are currently accessible to all paid subscribers. But in the next few months or quarters, we will provide regular updates of this data (and similar data) for Baiguan Pro subscribers. One of the many key differences between a paid subscription and a Pro subscription is that Pro subscribers will receive much more ongoing data updates.

Once again, for existing Baiguan paid subscribers: We are offering an upgrade to the Professional tier, giving you full access to all Baiguan Pro content. To upgrade, please REPLY to this email with the email address associated with your paid subscription. We are processing these upgrades manually through the end of the second quarter (June 30). (Please note that if you opt-in to the Baiguan Pro tier, your subscription will renew at the new rate if auto-renewal is enabled.)

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China’s Jan & Feb prints were improving across the board

Inflation: In January–February 2026, China’s CPI rose 0.8% year-on-year, and Core CPI hit 1.3% — the strongest reading since January 2023. PPI also showed encouraging signs at the factory gate, with industrial producer prices rising for five consecutive months on a month-on-month basis.

Spring Festival spending held up well, with services standing out. We covered this in detail in a previous post.

The key question: Is this organic or policy-driven?

This is where the honest read gets more nuanced. Much of the consumption uplift to date has been policy-assisted — trade-in subsidies, vouchers, and a record-long nine-day holiday that pulled spending forward.

The 2026 Government Work Report set a GDP target of “4.5% - 5%”—realistic but unexciting. The report prioritizes technology and new productive forces. The report prioritizes technology and new productive forces. Among its measures, China plans to issue RMB 250 billion in ultra-long-term special government bonds to support trade-in subsidies for consumer goods and to establish RMB 100 billion in fiscal-financial coordinated funds to boost domestic demand. To put that in perspective, these measures amount to less than 0.2% of GDP — hardly a massive fiscal stimulus. There is also no large-scale direct transfer to households on the table.

The elephant in the room: Is the strong Jan & Feb spending organic, and will it continue?

To put this into perspective, in today’s Charts of the Week, we return to two key pillars of domestic consumption: the wealth effect (real estate) and income expectations (salary).

Our January–February proprietary data on both fronts points in a positive direction.

Real estate: Our tracking of China’s online real estate platforms shows the second-hand housing market stabilizing under policy support, with transaction volumes in 90+ cities up 15% YoY. Viewing activity also picked up, with week-on-week viewings across 80+ sample cities rising 15%, reflecting strong buyer interest and a recovering market.

Salary: Average salaries growth across online recruitment platforms are gradually recovering, rising from near-zero in 2024 to around 4–5% in early 2026. This steady wage growth supports household purchasing power, suggesting consumption could continue at a measured pace.

Importantly, the worst of the real estate bubble’s impact on the workforce appears to be behind us, as we covered earlier:

Additionally, in select discretionary categories, we are already seeing what looks like organic spending growth that isn’t purely subsidy-driven. That is the signal worth watching. For example, we wrote about the Sports & Health sector yesterday and will follow up with more examples in future posts.

One additional tailwind: China sits in a different risk bucket than the rest of Asia

The escalation of the Iran conflict has rattled Asian markets, but not all of Asia is equally exposed. China actually sits in a more defensive position, holding large strategic and commercial oil reserves that help cushion short-term disruptions. It has also spent years diversifying its supply toward Russia and Central Asia.

In contrast, Japan relies on the Middle East for roughly 90% of its crude oil imports. South Korea sources about 70% of its crude from the region and routes over 95% of that through the Strait of Hormuz.

Market reactions reflect this. Compared to other Asian markets, China has seen a comparatively modest decline since the conflict began.

A-shares also carry a structural cushion that most markets lack: the “national team” actively intervenes when needed, reducing correlation to external shocks in ways that are hard to replicate elsewhere in the region.

Therefore, I am more constructive on Chinese markets, especially the on-shore market at this particular time.

We will continue tracking real estate and job market data — crucial macro datapoints for our paid subscribers in future posts.

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In this newsletter, I’ll walk you through some of my observations from this year’s festivities and share where the potential investment opportunities lie.

Overall trend: Strong demand; the rise of “Chinese aesthetic” in tourism

This year’s tourism numbers are impressive: Domestic tourism during the 2026 Chinese New Year holiday grew 19% year-over-year, reaching 596 million tourists, with tourism revenue increasing by 19% to RMB 803 billion. This means per-tourist spending, averaging around RMB 1,348, remained steady compared to last year. Outbound travel also saw a strong rebound, with a 24% year-over-year increase to 4.8 million travelers.

However, beyond these headline figures, the tourism boom is becoming more structural. The year 2026 may very well be the year when the “Chinese Aesthetic” takes full control of the tourism market.

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What the Spring Festival Gala tells

To understand the social climate in China today, one can’t overlook what happened at the Spring Festival Gala, an event watched by almost every Chinese person, or at least used as background noise. This year, the Gala featured more AI, robotics, and other high-tech elements, which have already been widely discussed. However, what often goes underreported is the increasing presence of foreign-language programs—something that very rarely appeared in recent years’ Gala. This shift signals a change in the social climate, moving away from political focus toward a more open-minded, economy-driven, and everyday-life-oriented vibe.

Most notably, rather than hosting the entire performance in the central television studio in Beijing, the Gala continued its format of holding satellite events across various cities. These events highlighted the unique cultural heritage and innovative economies of these locations, further showcasing China’s diverse regional identities.

During the Chinese New Year, famous tourist cities tend to get crowded, but this year, the Gala program selected cities that are less congested yet still rich in tourism resources or unique culture. Four cities were selected to host the satellite events: Harbin, Yiwu, Hefei, and Yibin, which are expected to drive the tourism sector forward.

The Spring Festival Gala serves as a microcosm of this broader trend: China has been increasingly promoting smaller cities and their tourism offerings, incorporating more intangible cultural heritage, and catering to the growing interest in unique local craftsmanship and cultural heritage. We have been covering this trend since 2024, which explains why smaller and lower-tier cities have outpaced big cities, provincial capitals, and traditional tourist hubs in tourist growth in recent years.

Beyond obvious factors like crowding and rising transportation costs, tourists have developed a genuine interest in “in-depth travel”—exploring the rich cultural and historical diversity of China’s provinces. (I often feel that visiting different provinces and regions in China could feel like stepping into a completely different “country,” each offering countless unique historical and cultural experiences developed and fused over a long history. This vast diversity will continue to fuel curiosity and growth in the tourism sector.)

Investment Implications: Overall, this trend is positive for hotels and airlines. The tourism boom is unlikely to be short-lived. People are genuinely exploring various cities, towns, and cultures, not just indulging in post-pandemic “revenge consumption.”

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Trend 1/4: The rebound of luxury spending

Hainan duty-free sales have seen growth since the official establishment of the Hainan Free Trade Port (FTP) last December. In January, Hainan duty-free sales grew by 45%. During the 9-day holiday period, the sales growth slowed to 15% year-over-year, but shopper counts still maintained a steady +20% year-on-year increase.

Outbound travel to Hong Kong also rebounded during the 9-day holidays, largely driven by duty-free shopping and high-end retail.

Investment Implications: The revival of luxury spending could continue this year, partially supported by the rally in the stock market, which could help improve sentiment among middle-class and affluent families. This should also benefit Hong Kong tourism and commercial properties, especially in high-end retail.

There could also be idiosyncratic opportunities, such as Laopu Gold, which benefits from the increase in jewelry spending, the cultural preference for gold in China, and the perceived value retention of gold amid rising gold prices.

Trend 2/4: “Experiential” over physical products

This is a structural trend that I previously explored in our inaugural post this year: 2026 China Equity Outlook. During this Spring Festival, live events, shows, concerts, and “emotional value” consumption continued to trend high.

During the 9-day holiday, Damai (HKG: 1060), China’s leading ticket booking platform, saw the number of performance projects grow 27% YoY. Specifically, Livehouse booking surged 65%, and immersive shows grew over 40%. Live events have become a lifestyle for the Chinese consumer.

“Mood boost” consumption, such as pop toys (潮玩), continues to trend high. Take Pop Mart, for example: without going into detail in today’s post, we still see triple-digit sales growth in January leading up to the 9-day holiday, extending the growth and IP rotation trend explored in our deep-dive previously.

Investment Implications: The rising demand for live events and “emotional” retail should be beneficial to booking platforms and IP-heavy brands.

Trend 3/4: Surge in agentic bookings

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“Charts of the Week” is Baiguan’s series that features key data points to help you quickly grasp the general state of affairs in China in just a few minutes. We handpick the highlights of the data charts from a variety of sources, analyzing and delivering insights trusted by 100+ top institutional and corporate clients worldwide at BigOne Lab.

Understanding China’s true job market is complex. On the one hand, official data suggests the overall unemployment rate remains steady and healthy. On the other hand, if you live in China, you hear constant conversations about how difficult the job market has become and how salary growth has stalled.

This is a crucial question: gauging the health of Chinese households is essential to determining whether China can successfully transition into a consumption-driven economy, which depends on healthy, organic income growth.

So, what is really going on?

China’s economic structure has been undergoing a quiet transition from “old” to “new” over the past few years. Much of this shift was muted by pandemic news. While headlines consistently mention “industrial upgrading” (产业升级) or “New Quality Productive Forces” (新质生产力), it can be difficult to decipher whether this is actually happening on the ground. Today, we dive into online job postings data to find the answer.

Methodology Note: To map this transition, I classified millions of job postings from major recruitment platforms into six categories: New Productivity & Industrial Upgrade, Real Estate & Related, “Old Tech” & Traditional Manufacturing, Finance, Education, and Others.

The “New Productivity” category tracks the strategic pivot toward sectors like EVs, semiconductors, AI, green energy, biotechnology, etc. “Old Tech” includes industries that grew rapidly over the past decade—such as e-commerce, software, and internet platforms—which have increasingly matured into traditional industries rather than representing the current “cutting edge.” Other categories are self-explanatory.

While some cross-functional roles defy perfect classification, the massive scale of data since 2020 provides a definitive view of the structural transformation occurring over the last five years. (See the footnote for full definitions.)

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Q1: From “old” real estate to “new” productivity: has the transformation happened?

News headlines are swamped with news of China’s struggling real estate market (rightfully so, as listing prices for existing homes have yet to find a bottom). However, a quiet transformation has taken place within the job market. Since 2020:

• The real estate and related industries (the orange area) have seen their share of total recruitment cut in half, dropping from 15% in 2020 to less than 8% by the end of 2025.

• Simultaneously, the “New Productivity” sectors (the blue area) have shown powerful counter-cyclical growth, with their share of job postings climbing from 10% in 2020 to over 15.4% in 2025.

It is no coincidence that the added value of China’s real estate industry fell to only ~6.3% of GDP in 2024 [*]. (In my opinion, this partly explains why Beijing feels less urgency to launch a massive stimulus; real estate no longer influences overall employment as heavily as it did just five years ago.)

Despite the “structural pain” society is currently enduring, this shift proves the underlying logic of the Chinese economy has fundamentally changed. The absolute number of jobs created by the ‘New Productivity’ sectors (an increase of about 300,000 positions) has effectively offset the bulk of the losses in the real estate sector (a loss of about 350,000 positions).

The transformation of the “New” replacing the “Old” real estate is now firmly established in the trend data.

Q2: Why do on-the-ground sentiments feel so cold?

If the overall number of jobs has remained relatively stable and “Hard Tech” is booming, why is public sentiment so gloomy?

The answer lies in structural friction and a perceived “quality downgrade” for the middle class. Real Estate, Finance, and Education—industries that traditionally recruited a significant and highly educated portion of the population—have seen a consistent shrinkage in job postings since 2022, never recovering to pre-pandemic levels. These happen to be the three high-paying industries most favored by the university-educated, urban middle class (the demographic with the strongest voice on social media). These traditional sectors also still serve as a massive reservoir for the labor force, maintaining a share of roughly 32%.

For those who managed to keep their jobs in these industries, salary growth has been optimistic for them.

The new jobs replacing the old ones offer no easy transition. You cannot simply retrain a real estate marketing manager to design semiconductors or engineer hydrogen fuel cells. The booming “New Quality Productive Forces” require highly specific STEM backgrounds (often Master’s or PhDs). Meanwhile, the other side of the job growth spectrum—such as wholesale, retail, and local services—often represents a downgrade in social prestige and stability for university graduates.

This “talent incompatibility” is what creates the profound sense of a “job crisis” on the ground.

Q3: Are there other interesting insights and key takeaways for investors?

If you want to find the next structural growth opportunities in China, follow the hiring.

Trend 1: Consumer internet could soon become a “utility”

The era of hyper-growth for tech platforms and e-commerce—sectors that once defined the ‘cutting edge,’ provided the most sought-after roles for China’s top-tier talent, and made investors filthy rich—is over. When we examine the absolute job gains and losses across sub-industries from early 2020 to early 2026, the data paints a vivid picture of an economy executing a ruthless, structural pivot.

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First, Alibaba’s Qwen triggered a nationwide frenzy by offering “tea freedom” through a massive milk tea subsidy, sending its Qwen AI app to the top of the charts and creating messes at some milk tea shops as delivery people scrambled for orders.

Not to be outdone, Yuanbao, Tencent’s own AI chatbot, launched a billion-yuan red packet campaign, hoping to recreate the success of WeChat Pay. However, the plot twisted when WeChat, the centerpiece of the Tencent family of products, abruptly restricted the sharing of these promotional links to curb spam and “induced sharing.”

ByteDance’s Seedance 2.0, on the other hand, stunned the whole world by its mesmerizing audio-video co-generation technology, strong character consistency, and director-level scene transition, effectively giving every social media user their own Hollywood-quality production studio.

And Spring Festival has not even started!

At this point, I want to put down some preliminary observations here, if only to make a mental mark for the record amid these rapid, crazy changes that are unfolding at this very moment.

Observation 1: The market rewards the cutting edge, but penalizes the old playbook

If it were a decade ago, Tencent’s Yuanbao red packet campaign would have excited the market. After all, the whole red packet playbook was exactly what ushered WeChat Pay into success a decade ago. However, this time, the campaign has caused much more doubt than excitement. As a result, Tencent’s share price has already dropped more than 15% year-to-date at the time of writing this piece.

Nor is the market very excited about BABA’s milk tea giveaways either. Its stock price has traded sideways despite its Qwen app almost becoming the most actively used AI app in China within an extremely short period of time.

Contrast that with Zhipu AI, believed to be behind Pony Alpha, an open-source coding model that many developers compare to Claude Code in capability. Zhipu also announced its GLM-5 model just now, which sent its shares almost quadrupling only a month after its IPO.

The divergence is striking. In this decade, the old playbook no longer inspires. The market is clearly looking for genuine frontier capability, not user growth engineered by subsidies. Merely having more users, if those users are acquired through incentives rather than through technological excitement, is heavily discounted.

Observation 2: The real market leader is not tradable

It’s also a pity that the company that is arguably leading China’s AI race is not listed.

ByteDance, which has Doubao, currently has the most popular AI chatbot in China and arguably the highest user stickiness. Many users already treat Doubao as a daily companion, almost in the sense portrayed in the film Her. While Qwen may be close in daily active users, much of that still appears subsidy-driven. Doubao’s user base feels more organic and durable, at least at this stage.

At the same time, ByteDance’s Seedance 2.0 has become the global leader in video generation since its recent debut. ByteDance’s trial with AI-native smartphone also inspires imagination. (You can check out a product test of Doubao phone here made by , our partner newsletter.)

Yet ByteDance is not listed. Neither is Huawei, another important AI force.

As a result, even if one believes strongly in the long-term future of Chinese AI, the Hang Seng Tech Index may unfortunately not be the most direct way to express that view at this moment. Core constituents such as Alibaba and Tencent have been weak, and the index has traded sideways.

Observation 3: The great divergence of how AI would impact other industries

As much as there is a domestic divergence in how old and new forces tackle AI, internationally, a significant divergence is emerging in how markets interpret AI’s impact on other industries.

In the US, when Anthropic or Google launched a new model, software and business service stocks sold off sharply. Hundreds of billions in market value could be erased in days. The dominant narrative is that the old industries are at risk of decimation.

In China, sentiment looks different. When major breakthroughs in video generation like SeeDance appear, online literature, film-making, and content platform stocks rally. Even if China’s software sector has not been exceptionally strong, it has not collapsed in the same way as in the West either. And milk tea brands like Guming and Mixue are emerging as the biggest net beneficiaries of Alibaba’s generous subsidies.

Why?

One reason is industry maturity. China’s SaaS industry never truly developed into a large, standardized, high-margin sector comparable to the US. Much of the market remains project-based and customized. Ironically, that lack of maturity could prove resilient in an AI era. Companies built around implementation and consulting may still be needed, while benefiting from lower AI-driven costs.

As for the entertainment industry, China does not yet have a Hollywood-sized creative market to disrupt. When AI improves content creation, investors focus on new possibilities rather than on the elimination of entrenched incumbents.

There may also be a deeper cultural and political layer. In the current Chinese context, it is difficult to imagine technology wiping out an entire industry overnight without at least paying some price. The concept of common prosperity has shaped expectations around these things.

I do not claim to have a definitive explanation here. But this divergence itself is worth watching.

Observation 4: Trust first, commerce later?

The next major milestone in AI, after coding, may be agentic commerce: how AI changes how people transact and live.

Alibaba is positioning itself as the leading global experimenter in this space. As the operator of one of the largest e-commerce ecosystems in the world, it is pushing consumers to shop in an AI-native way earlier than anyone else.

The results so far are mixed, however.

When I tried shopping through Qwen’s agent, the experience proved that AI-mediated shopping is technically feasible. But beyond that proof of concept, it did not feel revolutionary. Which leads me to think that chatting back and forth with a bot to find something to buy may not be the final form of commerce.

By classic internet logic, this is not a problem. “Move fast and break things” has been the motto for the industry since its very beginning. Early user experience can be rough as long as feedback loops are strong and iteration speed is fast.

But it may be too premature to push agentic commerce too aggressively, which leads to a more fundamental question: what do people actually look for when they shop?

For purely utilitarian purchases, such as recurring household goods, automated agents make sense. But much of consumption is not utilitarian. For many high-value purchases, the experience itself is part of the product: walking through a store, browsing shelves, and discovering items serendipitously. I don’t believe these are inefficiencies to be eliminated. For many, shopping is not just a means, but an end in itself.

A better model, intuitively and logically, would be to build trust first.

If users see their AI agents as friends, advisors, or companions, they will naturally ask them for shopping recommendations. Commerce then becomes an extension of trust, not vice versa.

If this theory is true, then agentic commerce does become mainstream, ByteDance, again, may still capture the largest upside. Doubao already has user trust and stickiness. Combined with Douyin’s e-commerce ecosystem, all the essential pieces are in place.

Tencent may also be underestimated. Even if it currently lags in model leadership, it possesses vast behavioral data to eventually build a trustworthy AI virtual assistant as well as a deeply integrated WeChat mini-program commerce ecosystem within to build a complete e-commerce experience.

Alibaba has limited social advantages and does not control the most popular AI companion app right now. It is therefore logical that it plays to its core strength: commerce. Whether that will work is questionable, but it just does not have many alternative strategic choices.

Observation 5: 2026 as the year of mass adoption

The upcoming Spring Festival holiday is shaping up to be another holiday about AI. Chinese AI companies are clearly timing product releases around this period, when users are at home, traveling, and experimenting with new apps.

It is not yet clear who will ultimately win. What is increasingly clear, however, is that 2026 is shaping up to be a year of mass AI adoption in China.

This adoption will go far beyond chatbot novelty. By the end of 2026, it is highly likely that a majority of urban consumers will have completed at least one transaction through an AI agent. Coders will routinely use domestic Chinese coding agents. Video creators will rely on AI-native tools as a standard workflow.

This unprecedented mass experimentation and mass adoption of AI applications, with all of the potential impact and consequences, will provide meaningful lessons for the whole world to see.

This should be our last post before the Spring Festival commences.

Finally, to all our readers, thank you for staying with us through another turbulent year in markets. May the Year of the Horse bring you momentum, milestones, and more exciting breakthroughs in your work and in your life!

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Since 2023, we have been frequently pointing out a clear trend: Chinese companies’ hiring for overseas positions has been outperforming the domestic job market, as firms actively expand abroad. “Going abroad” has been a prevailing theme among Chinese enterprises even before Trade War 2.0, and overseas hiring has only continued to gain momentum even after Trump’s second term commenced (as did China’s exports).

Now, the natural question for Baiguan readers and China investors is: what do we do with this trend?
In today’s Charts of the Week issue, let’s dig into that question with some interesting data insights.

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Chart of the Week: Growth in China’s overseas job recruitment slowed significantly in North America in 2025, but remained steady in almost every other region.

In 2025, exports remained one of the brightest spots in China’s economy, defying the headwinds from Trade War 2.0. Amid heightened volatility in US–China relations, hiring demand for jobs in North America cooled notably after the explosive growth seen in the prior year (though it still continued to grow).

Demand in other key regions, however, remained steady. Southeast Asia and Africa continued to be the largest overseas job destinations for Chinese enterprises, with no signs of slowdown. Meanwhile, demand in the Middle East — while still not a majority destination — has seen explosive growth over the past two years.

This suggests that China’s “going abroad” blueprint has become far more diversified over time, giving Chinese companies greater resilience — and more cards in hand — amid trade tensions.

When we break down overseas job recruitment by industry, we also see an interesting pattern of rotation and diversification.

In 2024, construction, business services, and information technology led the “going abroad” initiatives. (Internet and e-commerce giants such as Pinduoduo (Temu) were categorized under IT, which significantly drove the overseas hiring demand. Remember when we covered how China was exporting both merchandise and manufacturing capabilities back in 2023? Chinese companies going global: merchandise and manufacturing exports in the new era.)

In 2025, however, we are seeing a more mixed portfolio of industries ramping up overseas expansion — not just in physical products, but also in services such as financial services, research, and design. Notably, business services jobs saw explosive growth, largely driven by companies that support overseas expansion, including digital advertising, consulting, legal, and human capital services.

One interesting example: we observed that Michael Page’s China arm — a recruitment agency focused on senior and executive talent — experienced very rapid hiring itself. This suggests that Chinese companies are increasingly “settling down” abroad and investing in professional expertise and management talent. If anything, they are expanding their overseas footprint even further after Trade War 2.0 commenced.

Some companies in the spotlight

Looking ahead, 2026 is shaping up to maintain strong export momentum. One key takeaway here is that investors may want to pay close attention to companies with meaningful overseas exposure — or those actively ramping up efforts to expand international market share — as they have a higher likelihood of delivering positive earnings surprises.

This is especially relevant for industries weighed down by persistent pessimism around domestic “involution” and price wars, such as upstream raw materials, EVs, consumer electronics, and food delivery platforms. While the domestic market is unlikely to see a demand boom overnight, companies with strong overseas exposure could see overseas revenue surprises that are not yet fully priced in.

Let’s look at a few examples — companies that were hiring aggressively for overseas roles (or domestic roles targeting overseas markets) in 2H25. These are the firms positioning themselves for a much larger international footprint in 2026.

XPeng (XPEV) | Smart EVs & AI mobility

Overseas job hiring trend: +78.4% YoY

By the end of 2025, XPeng expanded its global footprint to 60 countries, with its overseas deliveries soaring 96% YoY to 45,008 units [*]. Entering 2026, XPeng will establish independent supply chain teams in Europe and Southeast Asia starting in 2026 to support localized operations [*]. One key upside is that Chinese EV makers can generate significantly higher margins in overseas markets. For instance, BYD reportedly generates three to four times more profit per vehicle overseas compared to its fiercely competitive domestic Chinese market as of late 2025. Overseas growth could therefore serve as a catalyst to lift pessimism surrounding China’s saturated EV market and shrinking margins amid ongoing price wars. (XPeng also comes with attractive autonomous driving optionality this year, which is shaping up to be an important investment theme to watch.)

Other EV makers have also ramped up overseas hiring, including Li Auto (+385%), Changan 000625.SHE (+385%), and Dongfeng 0489.HK (+180%). BYD’s overseas hiring did not expand further in 2025, largely because its hiring already surged in 2023, as BYD began building its overseas footprint well ahead of peers.

Yili Group (600887.SH) | Dairy products

Overseas job hiring trend: +408.3% YoY

This might come as a surprise to many. It’s hard to imagine a traditional dairy maker—dealing with fresh, perishable goods—successfully selling into overseas markets. Yet, Yili is doing exactly that by building actual factories on the ground. Their Indonesian production base is now the largest ever built by a Chinese dairy firm in Southeast Asia [*]. Instead of just exporting Chinese milk, they are localizing the brand; for instance, their Joyday ice cream is now the fastest-growing brand in Indonesia and has already reached over 10 countries across the Middle East and Africa. They are essentially exporting their manufacturing playbook and supply chain efficiency to high-growth emerging markets where dairy demand is still booming. I think this could bring a nice catalyst, especially given that the narrative is predominantly dominated by concerns over deflation and low birth rates in China.

Similar companies are taking the same strategy: Mengniu Dairy 2319.HK (280% YoY) and Anjoy Foods Group 603345.SHA (550% YoY) are both ramping up the hiring for the overseas market in 2025H2. Pleasant surprises may emerge from these “boring” businesses in 2026.

Continue for more examples and data points. To get a sense of what is offered, you are welcome to check out this older post in the same series: Charts of the Week. You can also get free access by sharing us. Paid subscribers enjoy a variety of benefits. Check out the benefits: exclusive benefits for Baiguan’s paid subscribers.

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Following a series of bearish reports, short interest in the stock has remained stubbornly high. Pop Mart’s price has since corrected more than 35% from its peak.

The core narrative driving this sell-off is straightforward and, admittedly, compelling. Many argue that Pop Mart’s explosive 2025 run was a temporary ‘supercycle’ driven by a single IP anomaly—Labubu—and a viral moment in the West that is now effectively over.

For instance, short sellers argue that Labubu is a ‘one-hit wonder’ that has already faded from its peak with no successor in sight. They cite plummeting search interest, cooling social media buzz, and falling resale prices on second-hand platforms as proof of demand destruction.

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While our own social media data confirms this trend—and I do acknowledge that the Labubu craze has decelerated—I remain constructive on the current setup for the company following this sharp correction.

In a nutshell, I believe the operational reality at Pop Mart points to normalization, not a total collapse. There is a massive difference between a company going to zero and a company returning to ‘normal’ (and still rapid) growth.

Behind the paywall, I will explain why Pop Mart doesn’t look particularly expensive at these levels, backed by BigOne Lab‘s recent sales and social media data, as well as some on-the-ground observations of new monetization mechanisms the company has recently rolled out.

Disclaimer: This newsletter is for informational purposes only and does not constitute investment advice. Please do your own research or consult your financial advisor.

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Back in July, I wrote about how Chagee was selling caffeine “the Chinese way,” and its ambition to become the “high-end” tea brand in China—much like Starbucks is to coffee. I noted that while Starbucks was struggling with poor localization and declining “price-for-value,” Chagee had captured the “ancestral blood awakening” of Gen Z consumers who were rediscovering tea as a healthier, cooler alternative to coffee.

The irony today is thick enough to chew on. As we enter 2026, both the “master” (Starbucks) and the “apprentice” (Chagee) are running into the same wall in China. What was once a race to define premium branding in coffee and tea has devolved into a cut-throat fight for survival.

In 2025, China’s food delivery platforms entered into a fierce price war. With massive subsidies flooding the system, coffee and tea brands emerged as the biggest beneficiaries: consumers rushed to order beverages for delivery at steep discounts—to the point where “zero-yuan milk tea” briefly became a reality.

Chagee and Starbucks, however, took a more principled—and ultimately painful—stance. Both brands largely refused to join the subsidy bloodbath in order to protect their premium positioning. The outcome was mixed. By November 2025, Chagee’s relative takeout market share had fallen sharply. Meanwhile, peers such as Luckin used subsidies to aggressively expand, and Starbucks—despite also staying out of the price war—managed to retain comparatively greater resilience in market share.

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Chagee’s PR Crisis: Crossing the Red Lines

If the recent numbers weren’t bad enough, a series of PR crises has begun to erode Chagee’s premium branding.

In December, Chinese social media erupted over Chagee’s high caffeine content after a prominent KOL claimed that some of its teas, due to their caffeine concentration, were “edging toward drugs 蹭准毒品”. Even before this incident, it was not uncommon to see consumers sharing experiences online about difficulty sleeping or heart palpitations after drinking Chagee’s tea. Most of these discussions were anecdotal and hard to verify—personally, I’ve never experienced such effects, though I know people who have—but the KOL’s remarks pushed the controversy to an entirely different level.

In China’s historical and cultural context, “drugs” is an absolute red line—and the comparison clearly struck a nerve with consumers. Chagee’s caffeine levels—roughly 117 mg in a 600 ml cup—remain well within accepted adult safety limits, regardless of consumers’ subjective experiences. Yet, whether due to quality-control issues or something else, the brand has gotten this reputation, and the mere association with “drugs” was enough to damage the image of a brand that markets itself as “clean” and “low-burden.”

To make matters worse, a viral livestream days later showed a Chagee employee preparing drinks with her bare hands. For a brand that charges a premium, this single moment delivered a visceral blow to consumer trust.

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The IPO Aftermath: A Turnaround or a Trap?

Since Chagee’s high-profile NASDAQ debut in April 2025, Chagee’s stock has been in a freefall, losing 60% of its value.

Now it’s time to ask the hard question: What went wrong? Is the “Starbucks of Tea” narrative dead, or is there a turnaround story?

The High-End vs. Mass-Market Trap

Chagee, often positioned as the “Chinese student” of Starbucks, has closely mirrored the coffee giant’s strategy by targeting white-collar professionals in premium shopping malls. While mass-market competitors are shrinking their store footprints to cut costs, Chagee has doubled down on the idea of the “Third Space”—the zone between home and work where people are meant to linger.

To reinforce this positioning, Chagee has moved beyond its standard 60–80 square-meter stores and begun opening oversized “Super Tea Warehouses.” One example is its roughly 1,000-square-meter flagship in Hong Kong, designed to cement its premium image. These locations function less as beverage outlets and more as brand-experience teahouses, leaning heavily on cultural storytelling: wood-toned interiors, seal-script wall designs, and high-end decorative installations inspired by Tang-dynasty tri-color Sancai glazes. The underlying bet is to reframe tea as a “lifestyle” product rather than a simple drink, capturing high-frequency moments such as office tea breaks.

Yet this commitment to high-end positioning has unfortunately left both Chagee and Starbucks trailing their peers in a deflationary market. While I’ve previously argued that Chinese consumers are indeed spending more on “experiences” and “lifestyle,” drinking tea is rarely perceived as one of them. For most Chinese consumers, tea remains a functional staple—not an experiential indulgence. Chagee’s 15–22 RMB price range makes it “expensive” in a deflationary environment.

Seen this way, the struggle is less about “foreign” versus “domestic” brands, and far more about a structural mismatch between high-end positioning and a market that is trading down.

Why Chagee Wins Abroad While Stalling at Home?

While Chagee’s domestic performance is facing a squeeze, its overseas performance tells a completely different story. In 3Q25, Chagee’s overseas GMV surged by 75.3% year-over-year, reaching RMB 300 million. Its network outside Greater China expanded to 262 stores, with Malaysia alone accounting for 196 locations.

This raises an interesting question: Why is a brand that is struggling to hold onto market share in China finding such traction abroad?

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Price Wars Cool Down as In-Store Shopping Returns

The price war among Chinese instant delivery platforms began in early 2025 when JD entered the race, intensifying through the summer as Meituan and Eleme joined the fray. While this initially created a massive spike in takeout demand, the momentum has since collapsed as prices returned toward normalization in the second half of the year.

Earlier this year, competition became so intense that consumers could occasionally get bubble tea for virtually zero yuan through platform subsidies. While this was clearly a lose-lose situation for delivery platforms, food and beverage chains benefited from the subsidy war as consumers rushed onto takeout platforms.

Coffee and tea brands were the biggest beneficiaries of these price wars. In today’s newsletter, we examine the performance of five major coffee and tea chains—Luckin (OTCMKTS: LKNCY), Starbucks (NASDAQ: SBUX), Mixue (2097 HK), Chagee (NASDAQ: CHA), and Guming (1364 HK). Together, these companies account for a large share of China’s overall coffee and tea market. Using data up to November this year, we analyze their performance and assess who emerged as winners—and losers—in the subsidy war.

My colleague and I have also examined the impact of the subsidy war on delivery platforms in earlier newsletters. Interested readers can find our analysis here:

For today’s newsletter, we use BigOne Lab’s offline transaction panel data, along with tracked takeout data from major platforms (Meituan and Eleme), to analyze performance across both in-store and delivery channels. Historically, this dataset has allowed us to track sales growth trends with a high degree of accuracy.

The price erosion

Amid cut-throat market competition, most brands have already seen their in-store average selling prices (ASPs) contract over the course of the year.

The takeout market tells a more dramatic story. Following JD’s entry, takeout ASPs for most beverage brands fell sharply. In contrast, Chagee and Starbucks largely stayed out of the subsidy war, keeping their pricing relatively stable compared with other brands.

Behind the paywall：

• Chart 4: relative market share for 5 coffee & tea beverage brands (in-store)

• Chart 5: relative market share for 5 coffee & tea beverage brands (take-out platforms)

• Chart 6: estimated sales growth for 5 coffee & tea beverages brands (in-store)

• Chart 7: estimated sales growth for 5 coffee & tea beverages brands (take-out platforms)

To get a sense of what is offered, you are welcome to check out this older post in the same series: Is Laopu Gold’s Rally Over? 6 Charts on Recent Performance — Charts of the Week. You can also get free access by sharing us.

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Relative market share

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To justify further gains, we need to see the baton pass from policy-driven sentiment to genuine fundamental earnings growth.

While deflationary pressures haven’t vanished, the floor is firming: salaries are showing early signs of increase, and the property market has stopped its freefall. (This stability was achieved without massive “flood-like” stimulus—I think that suggests the bottom is likely in.)

So moving forward, I expect a “Slow Bull” market.

Additionally, the rate-cut cycle that is now in place is traditionally a positive catalyst for Hong Kong. I think 2026 will be a year of selective alpha. Here are my thoughts on the themes that will define the years to come.

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Theme 1: The Consumption Pivot (Services > Products; Discretionary > Staples)

In my opinion, the Chinese consumer market is neither a total “trade down” nor a “trade up” story, but rather presents opportunities in its pivot from physical products to services, and from staples to discretionary.

What’s not working:

The struggle to escape the deflationary gravity is evident in the macro data. November data points to a clear cooldown: social retail sales growth slowed to 1.3% year-on-year, marking six consecutive months of deceleration. Within this slump, I have observed that staples are consistently performing worse than discretionary items; for instance, premium Baijiu continues to suffer from persistent price erosion. Furthermore, the momentum from earlier “trade-in” (以旧换新) subsidies is hitting a wall. Categories like smartphones, EVs, and home appliances are seeing sales stalls as these subsidies taper off.

A lot of these big-ticket, non-recurring items essentially exist in a saturated “stock market” where policy has simply pulled forward domestic demand that would have happened later. This is why I am avoiding stocks caught in the “involution” trap (to name a few examples: BYD and the broader EV sector, as well as Meituan and JD, where the price wars in food delivery and e-commerce show no signs of a ceasefire.)

What’s working:

However, I still see prosperity in sectors that reflect a fundamental shift in the Chinese lifestyle—the so-called “new consumption“ that we covered multiple times previously. This “new consumption” isn’t just about chasing 2025 stars like Pop Mart or Laopu Gold (in fact, I would be cautious about chasing those specific highs in 2026.)

The broader theme is that we must focus on the “new” things the younger generation actually values: items or services that bring joy, comfort, meanings and differentiation rather than generic utility.

For instance, this pivot directly favors the gaming sector. I remain bullish on Tencent and NetEase because they are uniquely insulated from deflationary cycles; they provide high-frequency “emotional value” that consumers are loath to cut.

I also see continued outperformance in “experiential“ spending on services (instead of physical goods). Throughout 2025, service-sector growth consistently outpaced the broader retail spending. In particular, spending on travel, live concerts, shows, and other offline events remained highlights. This trend will continue to benefit OTAs and lifestyle-centric hospitality brands like Atour that have successfully differentiated their “experiential” offering.

“Pet economy” is another high-conviction example. In an environment defined by lower birth rates among the younger generation, the “humanization” of pets represents one of the few areas where spending remains remarkably inelastic and growth remains certain.

Related reads about China’s service sector potential:

Theme 2: Domestic AI/Chips Independence

Semiconductor self-reliance in China is a high-certainty theme that will persist regardless of external geopolitical shifts. For instance, even with the Trump administration recently easing export restrictions for Nvidia’s H200s—albeit with a 25% fee attached—Beijing’s push for independence remains unwavering: China set to limit access to Nvidia’s H200 chips despite Trump export approval, proving that this is a core national strategy rather than a reactive measure to sanctions.

According to sell-side research, domestic chips are expected to account for 40% of Chinese cloud provider capex in 2026, a significant leap from the 20-30% range we saw in 2025.

In a recent breaking news, China has already produced a working EUV lithography prototype in a high-security Shenzhen laboratory. While mass production remains a long-term goal (likely for 2030 or beyond), the existence of a working prototype generating extreme ultraviolet light suggests the timeline for semiconductor independence is accelerating faster than most analysts projected.

Finally, we cannot ignore the recent heat in the capital markets. The explosive IPO debuts of Moore Threads and MetaX in December 2025—with first-day surges exceeding 500%—demonstrate that investor appetite for the sector is high. This influx of liquidity will serve as a powerful catalyst for market sentiment heading into 2026.

Theme 3: Innovative Drugs—China’s Next “EV” Growth Story

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Recent macro data has sent mixed signals. On one hand, China’s CPI has turned positive for two consecutive months, sparking discussions on whether the economy is finally walking out of deflation. Although November’s headline CPI was primarily driven by an increase in vegetable and gold prices, the core CPI (excluding more volatile items, including food & energy) continues to trend upward.

Chart in highlight: After excluding goods related to trade-in programs and the gold category, the core CPI remains on an upward trend.

From our partner CF40 Research‘s latest takeaways from China’s November 2025 macroeconomic data. CF40 Research is a leading independent think tank in China focused on macroeconomic and financial policy.

This resilience is largely driven by services. As we noted previously, services are becoming the structural growth engine of China’s economy. Service consumption grew 5.4% year on year from January to November (which is above the 4% for total social retail sales).

In contrast, physical goods consumption remains weaker. Additionally, the “sugar high” from the National Day Golden Week in October appears to be fading. November data points to a cooldown: social retail sales growth slowed to 1.3% year on year, marking six consecutive months of deceleration. The broader consumption recovery is facing more challenges as government subsidies taper off.

Today, we look at high-frequency data across housing, dining, liquor, retail, luxury sales, and the job market to gauge the true temperature of the recovery as we head into the end of 2025.

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Real Estate: The post-holiday cool-down

Key Takeaway: Transaction volumes and viewings continued to drop after the October peak.

In week 50 of 2025 (Dec 7–13), second-hand home transaction volumes across 90+ cities fell 20% year on year. Households remain in a wait-and-see mode, with no clear signs of a meaningful improvement in market confidence.

Across first-tier, new first-tier, and second-tier cities, viewing activity has turned negative across the board on both a month-on-month and year-on-year basis.

Dining

Key Takeaway: Consumers return to rational spending following the holiday splurge.

While October saw a spike in dining activity, November data from BigOne Lab’s offline dining index shows a rapid normalization. Notably, the average selling price (ASP) growth slowed significantly to just 0.4% year-on-year in November.

High-end Baijiu (white liquor), especially Moutai, is often viewed as a barometer for business activity and sentiment in China. Wholesale prices for major premium brands, including the bellwether Moutai 1935 and Wuliangye, have seen steep declines throughout the second half of 2025, reflecting weak business and banquet demand.

Correspondingly, the sales performance of major liquor companies (Moutai, Wuliangye, Luzhou Laojiao) in offline channels has also cooled down after the holiday season pick-up. Most recorded negative or slowing year-on-year growth in Q3, and moving into Q4.

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Retail

Key Takeaway: Discretionary consumption is outperforming, while housing-related spending drags down the total.

Data from October and November (combined) paints a clear picture of the structural divergence in Chinese spending.

• “Discretionary” and “feel-good” categories are growing. Cosmetics (+5.4%), Sports & Entertainment (+7.0%), and Gold/Jewelry (+18.9%) saw decent growth.

• Housing-related sectors are deep in the red. Building and decoration materials plummeted -15.1%, and household appliances fell -20.6%.

Categories with lower growth rates mainly included building and decoration materials, tobacco and alcohol, daily necessities, and Chinese and Western medicines. Among these, the relatively low consumption of building and decoration materials may be related to the accelerated weakening of commercial housing sales in the second half of the year.” [CF40 Research]

This reinforces our view that the consumption slump is not uniform—investors should focus on alpha rather than beta, and avoid staples and sectors tied to the property market downturn.

This year’s Double 11—China’s largest e-commerce shopping festival—delivered a muted performance. The tapering of national consumption subsidies was a key factor.

Take JD.com as an example. As one of the platforms that benefited the most from subsidy policies, JD saw GMV growth in October–November 2025 (including both overall and self-operated businesses) come in well below last year’s pace.

To unlock the full analysis on e-commerce sales (Tmall/JD/Douyin), luxury sales, and the latest salary trends in the job market, consider becoming a paid subscriber. To get a sense of what is offered, you are welcome to check out this older post in the same series: Charts of the Week. You can also get free access by sharing us.

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