China's Gen Z Consumer Revolution: Earnings Momentum and Long-Term Re-Rating Potential in a Shifting Market

In 2025, China's Gen Z demographic—born between 1995 and 2009—is reshaping the consumer landscape with unprecedented spending power and a distinct appetite for emotionally resonant, culturally relevant products. This generation, now 15–17% of China's population, is projected to control $2.4 trillion in spending by 2035, driven by a blend of digital fluency, sustainability consciousness, and a preference for novelty. For investors, the implications are clear: equities targeting Gen Z's emotional and cultural consumption are not just capturing market share but redefining growth paradigms.

Earnings Momentum: A New Wave of Consumer Champions

The financial performance of Gen Z-focused Chinese equities in 2025 underscores their alignment with this demographic's evolving preferences. Pop Mart International Group (09992.HK), the blind-box toymaker, exemplifies this trend. Its Q2 2025 revenue surged 165–170% year-on-year in China, with overseas sales jumping nearly 480%. The company's market capitalization hit $55 billion, surpassing JD.com, as Wall Street analysts raised price targets citing its IP-driven innovation and global expansion. Similarly, Laopu Gold (06181.HK), a jeweler leveraging traditional Chinese designs, reported a 279–288% year-on-year net profit increase in H1 2025, fueled by gold price spikes and Gen Z's appetite for luxury collectibles.

These companies thrive by blending emotional appeal with digital agility. For instance, Mao Geping Cosmetics (01318.HK), a beauty brand founded by a celebrity makeup artist, leveraged social media and influencer partnerships to achieve a 34.6% revenue growth in 2024, with a gross margin of 84.4%. Meanwhile, Mixue Group (02215.HK), the budget ice cream chain, capitalized on Gen Z's preference for affordability and convenience, seeing its stock price double post-listing in 2025.

Demographic Tailwinds: A Structural Shift in Consumption

The long-term re-rating potential of these equities is anchored in structural demographic and cultural shifts. Gen Z's spending is not merely transactional but deeply tied to identity and self-expression. The rise of the “Guochao” (China-chic) movement, which fuses traditional aesthetics with modern design, has created a fertile ground for domestic brands. For example, Laopu Gold's 24k gold jewelry, infused with cultural motifs, resonates with Gen Z's desire to own “heritage-infused” luxury.

Moreover, Gen Z's digital-first behavior—spending 108 minutes daily on platforms like Bilibili and Xiaohongshu—has enabled brands to bypass traditional retail channels. Social commerce and live streaming have become critical touchpoints, with Bilibili's Q1 2025 ad revenue growing 18% year-on-year, driven by AI-powered targeting tools. This digital ecosystem allows companies like Guming Holdings (06830.HK) (bubble tea) and Bloks Group (09988.HK) (toys) to iterate rapidly, test new products, and scale efficiently.

Risks and Re-Rating Catalysts

While the momentum is compelling, risks persist. Regulatory scrutiny of blind-box models (e.g., Pop Mart's lottery-like sales) and concerns over valuation multiples (Laopu Gold trades at 32x forward P/E) could introduce volatility. Additionally, global gold price fluctuations and supply chain bottlenecks may impact Laopu's margins. However, these risks are counterbalanced by macroeconomic tailwinds:
1. Demographic Expansion: Gen Z's share of China's population is expected to rise to 21% by 2025, with spending power quadrupling to $2.4 trillion by 2035.
2. Cultural Capital: Brands that align with Gen Z's values—sustainability, authenticity, and digital integration—are poised for sustained growth. For example, 90% of Gen Z consumers prioritize eco-friendly products, a trend Mao Geping has capitalized on with recyclable packaging.
3. Global Expansion: Pop Mart's overseas sales growth (480% in 2025) and Laopu Gold's potential FTSE index inclusion highlight the scalability of these models beyond China.

Investment Thesis: Balancing Momentum and Caution

For investors, the key lies in identifying equities that combine strong earnings momentum with durable cultural relevance. Pop Mart and Laopu Gold offer high-growth narratives but require careful monitoring of regulatory and valuation risks. Mao Geping and Mixue present more defensive opportunities, with robust gross margins and scalable business models.

A diversified portfolio approach is advisable. For instance, pairing high-beta plays like Pop Mart with mid-cap names like Mao Geping can balance growth and stability. Additionally, investors should track macroeconomic indicators such as gold prices (critical for Laopu) and social media engagement metrics (vital for Bilibili and Xiaohongshu-driven brands).

Conclusion: A Generation-Driven Opportunity

China's Gen Z consumer revolution is not a fleeting trend but a structural shift in how value is created and captured. The equities leading this charge—Pop Mart, Laopu Gold, and others—are redefining growth through emotional resonance, digital agility, and cultural alignment. While risks exist, the demographic tailwinds and evolving consumption patterns suggest that these companies are well-positioned for long-term re-rating. For investors, the challenge is to discern which names can sustain their momentum in an increasingly competitive and regulated environment.