China's consumer market: an enigma that keeps investors guessing—and one venture capital firm daring to decode it. Foreign investors have long wrestled with whether China can still produce the high returns that once seemed almost guaranteed, especially in the unpredictable sphere of consumer brands. But here's where it gets controversial: despite a population of 1.4 billion creating seemingly limitless potential demand, the behavior of Chinese consumers has become far more complex and harder to predict.
At the recent Milken Institute Asia Summit in Singapore, this paradox was front and center. Chinese households are tightening their budgets, slashing spending on nonessential items. Some investors describe these consumers as "spoiled," complacent due to an abundance of top-quality goods sold at heavy discounts. Yet, this skepticism is exactly what Black Ant Capital, a venture capital firm founded in 2016, is challenging.
Black Ant Capital has been quietly but strategically investing in China’s consumer market since 2017—backing memorable success stories like Pop Mart, Laopu Gold, and BusyMing Group. Take Pop Mart, the epicenter of China’s blind-box toy craze, which boasts a market value of 344.4 billion Hong Kong dollars (about $44.2 billion). Meanwhile, Laopu Gold, a jewelry company, has experienced a meteoric rise this year with a seventeenfold increase in market capitalization, reaching $15 billion. BusyMing is gearing up for a Hong Kong IPO, signaling it could be the next big thing in BA Capital’s portfolio.
Despite maintaining a low profile, Black Ant Capital has drawn global attention. The firm manages four funds—three denominated in renminbi and one in U.S. dollars—which collectively outperform almost all their regional competitors. According to Cambridge Associates data through Q1, their funds rank in the top 25% among 479 private equity and venture capital funds investing in emerging Asia.
At the Milken Summit, David He, founding partner of Black Ant Capital and a Pop Mart board member, attracted a crowd eager to capture his insights. Over coffee nearby, He emphasized that China's consumer narrative is far from over; it’s evolving and becoming richer—but only for those who know where to focus their attention.
When asked what initially pulled him toward Pop Mart, He highlighted the profound emotional connection their toys provide. "As children, we seek comfort in toys, and that urge doesn’t disappear with age," he explained. Pop Mart’s products inhabit personal spaces—desks, bedside tables—offering companionship and familiarity that grows over time.
He attributes Pop Mart’s success to the way it taps into consumers’ desire for emotional fulfillment. Today’s young buyers crave items that evoke joy and connection, and Pop Mart’s talented designers create characters that resonate deeply, backed by a dynamic commercial strategy that keeps those characters ever-relevant.
For other Chinese brands aiming to grow, He advises focusing early and intensively on the U.S. market, the world’s most influential and high-spending consumer base. His conviction that international expansion is critical, especially for mid- to high-end brands, starkly contrasts with some who prioritize domestic focus.
Looking ahead, Pop Mart’s future lies in continuously nurturing each intellectual property while creating richer, more immersive experiences—think exhibitions, theme parks—that deepen consumer interaction and loyalty.
Turning to Laopu Gold’s ascent, He sees it as a reflection of two powerful forces shaping Chinese consumer tastes: a broader retrenchment in spending paired with a cultural resurgence embracing homegrown luxury. During the pandemic, many Chinese middle-class consumers drifted from global luxury brands, but their appetite for quality goods that symbolized lasting value—such as gold jewelry—remained strong.
This cultural pride, intertwined with a call for sophistication, has propelled Laopu, which blends traditional Chinese aesthetics with contemporary design and superior craftsmanship. He predicts Laopu will continue to expand while firmly preserving its Eastern identity, much like Italian brands that maintain their national character despite global modernity.
BusyMing, the budget snack chain, represents another facet of China’s consumer landscape: affordability reigns, especially as lower-tier cities gain spending power. He sees this trend continuing and evolving into greater efficiency and cost control.
When asked about upcoming trends, He highlights a surge in products inspired by Chinese culture, growing interest in emotional well-being or "emotional healing," and the rise of feminism—areas that reflect a deeper sophistication in consumer values.
Tech-related consumer electronics also grab Black Ant Capital’s attention, but from a practical innovation angle—how new technologies translate into products that genuinely meet consumer needs, such as autonomous vacuum cleaners, drones, and smart home devices.
The firm’s investments include brands like Oladance, a headphone maker; Tenways Electric Bikes; and Yarbo, which produces autonomous snow blowers, showcasing a broad yet thoughtful approach to consumer tech.
Regarding exits, Black Ant Capital reports that 80-90% of their successful payoffs come via IPOs. While mergers and acquisitions are growing, He warns that starting your investment strategy hoping for a quick M&A is misguided. Instead, focusing on outstanding companies naturally leads to IPOs, which they view as the optimal exit for top performers.
This perspective might provoke debate: is the IPO-centric approach too narrow in a market shifting toward consolidation? Do early expectations of M&A blunt investor ambition for finding gems? Share your thoughts below.
— Special thanks to CNBC’s Penny Chen for her contribution.
Additional highlights from CNBC:
- Luxury brands are innovating to attract China’s younger consumers worldwide, says analyst Jack Dwyer.
- Nike CEO Elliott Hill discusses managing tariffs, production, and trade relations with the Trump administration.
- According to Nick Redman of Oxford Analytica, China’s push for homegrown chip tech stems from a belief the U.S. won’t be a trustworthy partner.
What you need to know:
- The World Bank has lifted its growth forecast for China to 4.8%, despite ongoing U.S. trade tensions. This adjustment closely aligns with Beijing’s official target of about 5% for 2025.
- Chinese electric vehicle maker BYD's UK sales exploded by 880% year-over-year in September, making the UK its largest market outside China.
- Preliminary data from China’s Golden Week holiday indicates subdued consumer spending growth compared to May’s Labor Day, with travel and retail activity still below pre-pandemic levels.
Quote of the week:
"If China were to increase its gold reserves to the average of middle-income emerging countries, it would need to buy two years’ worth of global gold supply." — Garry Evans, Head of Research Solutions at BCA Research.
Markets update:
Chinese stock markets were closed October 8 for the Mid-Autumn Festival, reopening Thursday. Ten-year government bonds saw yields dip slightly to 1.878%.
Upcoming data releases:
- October 13: Import and export figures for September
- October 15: Producer and consumer price indices for September
- October 20: Loan prime rates, housing prices, industrial output, retail sales, investment figures, urban unemployment rates for September, plus Q3 GDP data
Are you convinced China’s consumer revolution is simply evolving, or do you think the headwinds are too strong for sustained growth? Share your opinions and let’s debate the future of this pivotal market.
