"The story behind Baiguan" (reprinted) and our recommended writings - CNY Special Edition
For at least 4 years, the world has looked at China and believed this country is doomed. China’s story is over. We can't innovate. The US would choke us to death.
We at Baiguan represent one of the lone and honest voices out there who disagree with this pessimistic view.
We are still in the first month of 2025, but the vibe shift in the air is noticeable. Xiaohongshu/RedNote has demonstrated to a large population in the West that China has much more to offer than they expected. DeepSeek has directly challenged the prevailing belief that the West will dominate AI with its arsenal of advanced chips. Over 1 trillion USD of value was shaved off in a single day, all while China stocks seem to be rising during the last trading days before the Lunar New Year. What’s more, Trump’s antics, ranging from his imperialistic demand for annexing Greenland to the pre-inauguration issuance of the Trump family memecoins, have re-enforced the idea that America’s leadership is about the over.
This Chinese New Year special edition will come in 3 parts.
First, we will reprint Baiguan’s story that we published in July 2023, which should be especially useful for the 6000+ new subscribers since then.
Second, we will provide links to some highlights from the last year, with an emphasis on AI and technology.
Lastly, we will also provide a list of our recommended newsletters about China that will come in handy for the Year of Snake.
But before reading, join our paying-subscriber-exclusive Discord community, where many vibrant discussions and sharings are happening now with like-minded people.
#1 Baiguan’s story (first published in July 2023)
How Baiguan was born
In late 2022, the team behind this newsletter, BigOne Lab, met the biggest external shock in our business life: the market we know well and serve well, is having the biggest disruption we have ever seen.
For years since our founding in 2016, we have striven to use high-frequency data to help investment funds and businesses around the world to track China's new economy industries with both accuracy and insights. We invested massive resources in tracking the performance of the hottest sectors at the time—sectors that promised trillion-dollar markets with tomorrow's unicorns: education, live-streaming entertainment, and community-group buying, among others. The business was great. We were also proud to believe that we played a positive role in helping the economy and our clients to grow.
Things took an abrupt turn in 2021. As we witnessed many of these industries come to a screeching halt, the value of some of our data products was also wiped out. Just as 2021 came to an end and when we thought things could not get any worse, then 2022 arrived, with it came the Ukraine war, the Covid lockdowns, and ever-rising geopolitical tensions that shook the very foundation of investor confidence in China, and thus our data business.
Clearly, the ground is shifting.
The shift is not just the industries we are in. In hindsight, our first golden period was no more than a by-product of a golden period in China's red-hot new economy sectors. We are but a product of our time, rising with its tide. We, the writers of this newsletter, were caught painfully in between the most unprecedented and largest socio-economic disruptions of our generation: the intensifying Sino-US great power competition, an aging yet over-leveraged population stuck at the middle-income level, a bloated real estate sector that could no longer sustain growth, and a contained ambition to ascend the technology ladder and supply chains. This confluence of historical inevitabilities whirled into disruptions that voided many’s presumptions about how China works, and how the world would evolve, including ours.
The disruptions went beyond borders. In three years, we saw a huge and widening divide between China and the world. Left shivering and confused from the events in 2021 and 2022, our clients, our friends, other China stakeholders, and we were unsure about how to understand China anymore. Foreign and local media we relied on were also not reporting information that helps. We ourselves also had an impulse to just stop figuring things out and leave.
But, on the other hand, China's significance to the world economy is unambiguous: it accounts for 18% of the world's total GDP (2022), 14% of global exports (2021), and 11% of global imports (2021), and emits 27% of the world's total carbon emissions (2021); more than 100 companies in the S&P500 have over 30% of their revenue coming from China.
Our guts tell us several things. First, obviously, China still matters. Second, if short-term tensions between China and the world become a long-term divide, no one will benefit. Third, some of the divides we saw are rooted in real issues, but if you could do as many travels, talk to as many people, have access to as much data, gather as many non-mainstream viewpoints, and be immersed in as much context - as we do, you may well find most of the “divides” are just imaginary.
The entrepreneurial souls in us asked: what can we bring to the world during this chaotic time? So, instead of only focusing on helping top-tier funds and corporates, we decided to open ourselves up to a much larger audience— investors, businesspersons, policymakers, or anyone with a genuine interest in China, and to tell the stories of China as we see it.
How Baiguan helps
What has troubled observers is that China looks like a much riskier place than it used to be compared with the three decades between 1990-2010 period. We are constantly asked, is China peaking? Will the economy get better? Will China go downhill from here ever after? Intuitively, we understand for many of the questions it's not a matter of data and facts anymore. It's a matter of belief, a leap of faith, a subjectively binary choice between in and out. And we are not shy about stating some of our core beliefs here:
We believe it's too bold a claim that China is peaking. If this were true, it would be the shortest rise of any major power in human history. Historically, the rise and fall of great nations progressed through centuries and is preconditioned by the cultural upbringings of generations of people. In the end, the strength of a nation depends on the self-drive and the vitality of her people, and the Chinese people are still among the hardest-working groups in the world. And, people do not just stop working hard in an instant. So we still believe China's growth story has yet to play out. That is why Baiguan will always look for business and investment opportunities in China for you. This is the main task of our Investment section.
Modern China's growth story is too unprecedented for linear thinking to work well. China has evolved from an agricultural to an industrial to a post-industrial cyber society in barely three decades. This implies that there are many vastly different population groups living under the same roof: foreign-educated white-collar workers switching from Starbucks to Luckin Coffee, elders who once experienced war and extreme poverty, middle-aged entrepreneurs who used to work in state-planned jobs before being laid off by the state, Gen-Z who grew up with mobile internet, rural migrant workers who switched from construction to food delivery, super-rich whose lifestyles were barely affected by the economic downturn but became more cultured and low-key... Many of China's contradictions come from the fact that all those pockets of people live in a society at the same time, and all public discourses and policies take this fact into account. To truly understand China, one has to be mindful of differences at these granular levels. This is why Baiguan will continue to tell stories of these different human groups with both data and on-the-ground insights. This is the main task of our Consumer section.
Now comes the part that sets us apart from typical business and finance newsletters: we believe that to truly understand China, you can't avoid talking about politics. Unlike Western societies, the government is a fundamental driving force in China. In fact, a lot of anxiety comes from not being able to anticipate the Chinese government's next move. There are many causes for this anxiety, and we will only name a few here:
Picking the wrong narrative. In the West, much of the narrative is about the government vs. the people, and about checks and balances on government powers to protect civil liberties. But we believe there is a more fitting narrative for an East Asian society: that of a family, of parents versus children. Sure, parents are authority figures who cannot be solely decided by electoral results, but likewise, there are also certain expectations for parents to take good care of their children. Public opinions also matter a lot in China, in the same way parents care about how their children evaluate them. Provided the intention is not to destroy the family, there is also diversity in both public and non-public debates, in the same way parents and children can interact and debate over dinner tables. (For more on this, we highly recommend this YouTube video explaining different narratives.)
A lack of understanding of history. As the civilization with the longest continuous history, China cannot be interpreted without reference to its past. Any child born in this country is imbued with a volume of history too dense to forget, and so the past stories will inform decisions today. And this is what our most popular post to date is all about.
Imagining the Chinese government as a single, unthinking monolith. When people think of China, they often visualize uniformity, such as armies goose-stepping with exact precision, or yes-men clapping hands and rubber-stamping pre-decided decisions. However, it's important to understand that these gestures are mere choreography, primarily intended to project an image of unity for a domestic audience. We, the serious readers of this newsletter with a real stake, should know better that the absence of presented individuality doesn't negate the existence of individual agency. Within the layers of bureaucracy, party committees, ministries, bureaus, offices, provinces, prefectures, counties, townships, and villages, real people exist, with diverse and potentially conflicting aims and interests. In fact, there is no shortage of open debates if you know where to look. (One of the best examples is the acclaimed 2007 Chinese TV classic, Ming Dynasty 1566 (IMDb, full series on Youtube). It illustrates how even ancient China’s imperial monarchies weren't simple top-down structures but complex webs of actions and reactions from all stakeholders.)
Our job, in this regard, is to help you appreciate an alternative narrative that may be more effective, the long and winding history, as well as the nuances in policy deliberation and decision-making. This will enable you to more quickly put unexpected changes into context the next time they occur. This is the main task of the China Context section.
#2 Recent highlights - AI, tech, VC, policy, and investments
Artificial intelligence
In “Can China catch up with the US in AI?”, written as early as May 2024, we correctly pointed out that there were no fundamental barriers baring China from catching up. We just didn’t realize we could be proven fewer than 8 months later.
On Jan 8, we shared with you a translated transcript of an interview with Liang Wenfeng, CEO of DeepSeek, now out of paywall.
On our YouTube channel,
shared a comprehensive take on DeepSeek-V3 two weeks ago, before relevant discussion became mainstream.And we just had a collaborative podcast episode on DeepSeek joined by
of and .Broader technology
In my personal newsletter
, I commented on why China will keep innovating despite the many tough challenges. I also explained why the success of China’s EV sector was not primarily due to government subsidies but a carefully timed industrial policy, a man-made hunger game, and a highly competitive industrial base. (Paying subscribers of Baiguan can enjoy free access to China Translated)How Black Myth Wukong rose from a "worst" business model to become a historic success story for China’s video game sector.
Venture capital and entrepreneurship
China's venture capital industry is dying, the most popular article to date on this newsletter (whose Chinese version also went viral on WeChat,) detailing the ground shift of China’s venture capital industry, half a year before mainstream news media discussed this issue.
Then we wrote about a series of new developments afterwards, including government policies designed to improve the VC environment as well as a new phenomenon of venture capital funds acquiring listed companies.
Policy
We did a comprehensive reading of the 3rd Plenum decisions, with a focus on practical issues that were more significant than others.
We wrote several articles following the “September Pivot”, explaining the logic behind the good, the ugly, and the normal.
We did an insightful podcast on exactly how Chinese leaders process information and whether they are in the know.
We ended the year with a strong assertion that the key emphasis of China’s policy-making in 2025 will be consumption, even before consumption was listed as a No.1 priority in the CEWC later. (We are not afraid at making strong assertions.)
Investments
We laid out the top 6 China equity trends to watch for 2025 here.
We shed light on a number of attractive sectors and specific companies, including the education sector, POP Mart, Laopu Gold, and Lululemon, and discussed whether PDD is a fraud.
#3 Other newsletters/research providers we recommend
Besides us, there are also a number of other newsletters and research providers that have been consistent in their independent thinking about China in the last few years. We commend:
who runs research powerhouse GaveKal Group, is someone we admire. While typical sell-side research only changes its stance according to market sentiments, Louis' independent research house always sticks to reasoning and good common sense and stands their ground. of is an ex-state-media employee and a top-tier policy analyst with whom Baiguan just had a series of podcast collaborations. Let us put it this way, if there is only one guy you need to listen to have a fair read of Chinese policies, it’s Zichen. is a new, fast-growing substack written by someone with a unique background story. The author behind it is a Shanghai-based German mathematician who was trained with THE best mathematicians that China had ever got, so investing is only his side project, as much as DeepSeek is only a side project of High-flyer. He wrote about China equities with good logic and on-the-ground “feel.” who writes , is an American energy consultant based in Shanghai. David has an impeccable analysis of China's power sector and rural affairs. His trademark travelogues of China’s many cities and counties, and conversations with taxi drivers are always a delight to read. of is a great resource to understand the “hard” part of China’s economics and finance. We could never wrap my mind around how an American like Glenn could have such a detailed knowledge of China's economic and industrial developmentMarcel Munch is a soft-spoken and extremely smart German equity analyst. I may not always agree with him on his particular equity picks, but I admire him for his consistency with his YouTube channel.
only writes in Chinese. Educated in Yale and LSE and working as the head of venture capital at a top China-based private equity fund, his is widely read among foreign-based Chinese elites and is known for his unequivocal optimism in the China model. is a buyside research analyst writing at . His takes are always witty and informative. I wish he could write more!