Soft signal: How Labubus became a barometer for the global economy

In 2025, few would expect a plushie keychain to reflect the state of the global economy. Yet Labubus, made by Chinese toy company Pop Mart, have become an unlikely signal of changing consumer habits, the rise of cultural commerce and China’s growing soft power, writes Noura Tan. Speaking to Jamie Zhou, a portfolio manager in the Asia Pacific Equities team, they explore China’s next wave of consumer exports, where sentiment shapes strategy in a time of rising protectionism.

Labubu, a US$30¹ collectible toy created by artist Kasing Lung, started as a niche item in China’s designer toy scene. It’s now a global hit – and possibly the most visible example of a new kind of Chinese branding.

Labubus first became popular in China, helped by celebrity endorsements and viral TikTok unboxings. These boosted its status as a cultural item. The hype has continued thanks to character-driven storytelling, limited product releases and the blind box format – where buyers don’t know which version they’ll get until they open it. This taps into the same emotional appeal as a McDonald’s Happy Meal.

The resale market has pushed demand even higher. Rare figures sell for large sums online². A four-foot-tall version was recently auctioned for US$150,000³ in Beijing. Fans queue for hours outside stores worldwide to get new releases.

This success has led to strong financial results, rarely seen in the toy industry. Pop Mart is now worth around US$40 billion – nearly twice the combined value of Mattel, Hasbro and Sanrio. Last year, it reported a gross profit margin close to 70%, compared to 45% for competitor Miniso, and around 20% for major Chinese manufacturers like Xiaomi and BYD⁴.

Soft power in hard times

Labubus’ rise is similar to past toy crazes like Beanie Babies (by Ty) and Furbies (by Hasbro). But this time, it’s happening in a tougher economic climate. Earlier fads reflected booming consumer spending. Labubus are thriving during financial uncertainty, post-pandemic changes and signs of recession.

This trend echoes the ‘Lipstick Index’ – a theory by Estée Lauder’s chairman Leonard Lauder. It suggests people buy small, emotionally satisfying items during tough times. First seen in the early 2000s recession, and again in the 2008 financial crisis, it’s now resurfacing with Labubus as the plush version.

The pandemic changed how people spend. With ongoing uncertainty, household income isn’t the only factor. Decisions are now shaped by savings, online shopping and a ‘value now’ mindset – where people want the most emotional reward for the least money⁵. This favours low-cost, visually appealing products that offer social status and emotional comfort.

Impulse buying has also increased since the pandemic – not despite uncertainty, but because of it. It’s driven by anxiety, a sense of lost control⁶ and the ease of buying through social media.

Chinese companies have responded well to this shift. Labubus are largely affordable but marketed as aspirational. Their success shows how Chinese firms are building global brands while dealing with a more divided trade landscape.

This isn’t a new strategy, but a continuation of China’s quiet leadership in consumer innovation. Success in China’s large and competitive market gives companies a strong base to expand overseas. With access to a tech-savvy audience, firms can test products, grow quickly and build strong brands at home before going global – often with more agility than their international rivals.

Repackaging ‘Made in China’

Since the 1980s, ‘Made in China’ has often meant cheap and fast. But now, Chinese companies are changing how they compete globally. This shift is shaped by rising protectionism, trade tensions and uncertainty.

The new strategy is simple: innovate at home, localise abroad.

Pop Mart shows this clearly. Its global success is based on emotional appeal, not just low prices. Labubu, inspired by Danish fairy tales, has become a flexible character with country-specific designs. This mix of home-grown innovation, supply chain control and local adaptation is now a key trait of China’s top global brands, says Jamie Zhou, Deputy Portfolio Manager of M&G China Strategy.

Other firms are using similar strategies. Xiaomi, now third in global smartphone market share⁷, offers Apple-like design at prices suited to middle-class buyers in places like India and Spain. BYD, once seen as a second-tier electric vehicle (EV) maker, now sells more EVs than Tesla worldwide⁸. It succeeds by meeting local rules, customer needs and forming government partnerships in Europe, Southeast Asia and Latin America.

Even in unexpected areas, this model works. Mixue, a budget tea and ice cream chain that started as a street cart, now has more outlets than Starbucks and McDonald’s⁹. Its growth comes from low prices, a strong supply chain and a fun brand – including a snowman mascot, regional flavours and a TikTok fanbase that blurs the line between customer and community.

Zhou says this localisation-first approach defines the new export model. “Pop Mart develops some of its most successful intellectual property (IP) through foreign designers, leveraging China’s manufacturing scale while incubating ideas abroad, like Labubu editions born in Thailand,” he explains.

“BYD adapts its vehicles to local preferences and regulatory environments, while Mixue’s durian ice cream, developed in Southeast Asia, became a surprise hit in southern China. Meanwhile, traditional giants were slow to respond,” Zhou adds.

These firms blend industrial efficiency with emotional design, scaled through digital platforms and tailored to local tastes.

Investors are taking notice. In March 2025, Mixue listed on the Hong Kong Stock Exchange with a valuation close to US$10 billion¹⁰. This shows strong interest in companies that combine market knowledge with China’s manufacturing power. By competing on aspiration as well as price, these firms are setting new standards for global success.

China adapts as protectionism rises

Labubus may be a passing trend, but they reflect a bigger truth: Chinese consumer influence and cultural exports are still strong, even as Western governments try to reduce reliance on China.

Since returning to office, President Donald Trump has expanded tariffs on nearly all imports, calling it a national security move and a fix for trade imbalances.

The US is also pushing to bring manufacturing back home, offering tax breaks and support. Deals with allies like the EU and Japan have unlocked billions in investment, aiming to reduce dependence on China and prepare for future global shocks.

But while governments tighten trade rules, Chinese firms are adapting. In 2025, BYD opened factories in Hungary, Thailand and Brazil, with more planned in Turkey and Cambodia. These moves help serve local markets, avoid US tariffs and manage geopolitical risks. Xiaomi has also changed its supply chain, adding production hubs in Vietnam and India to stay flexible and relevant.

This localisation goes beyond logistics. Like Pop Mart and Mixue, BYD and Xiaomi tailor their products to local tastes and rules. BYD designs EVs to meet European safety standards¹¹, while Xiaomi adjusts its software for European users.

Zhou notes, “We’ve seen a proliferation of Chinese brands moving up the value chain, and it’s proving favourable to invest in that trend.” While inflation continues to squeeze the American middle class, many Chinese companies operating in the US are thriving, thanks to their relative cost advantage, even amid rising tariffs.

But the implications extend beyond bilateral trade. Zhou points to third markets like Brazil, currently locked in a dispute with the US over economic sovereignty, as key battlegrounds. “Their actions will shape how Chinese and global multinationals, from the US, Japan and Korea, restructure their supply chains,” he says.

The new Silk Road

This isn’t globalisation as usual. It’s a new model where research and development stays in China, but production, marketing and compliance are tailored to each region. Western tariffs may have slowed traditional exports, but they’ve sped up the shift to services, IP-led business models and cultural exports – types of soft power commerce that are harder to control than steel or semiconductors.

We now see a two-speed system. At the top, governments tighten trade rules and aim for self-reliance. At the bottom, consumers still buy Chinese products – not just out of need, but because they genuinely prefer them. Pop Mart expects over half its revenue to come from international markets this year, rising to nearly 70% by 2030¹².

For investors, this means two things:

1. Old ways of judging Chinese consumer brands – like price and scale – aren’t enough. Today’s leaders win through emotional connection, cultural understanding and local relevance.
   
   
2. These firms are building value not just in physical assets, but in soft ones: IP, design and fan communities. In a world where supply chains are politicised, cultural products are harder to tax, regulate or copy.

“In an environment where physical supply chains are increasingly politicised, cultural products are harder to tariff, regulate or replicate.”
 

From tech to toys, Chinese firms are shifting from producers to storytellers. Their growth depends on regional relevance, not just volume.

Labubus may fade like other fads – plush toys rarely last. But the strategy behind their success will remain: emotionally aware design, localised marketing, scalable IP and flexible manufacturing. This is the new Silk Road – built on soft power and consumer connection, helping ease the tensions that often follow China’s rise.

“In this reshaped global economy, the winners won’t be those who build the highest walls, but those who learn to move around them.”

For investors, the message is clear. In a world of rising trade barriers and localised demand, the companies most likely to succeed will be those that offer emotionally resonant design, region-specific strategies and adaptable supply chains.

In 2025, the clearest sign of that shift might just be a blind box with a plushie keychain inside.
 

¹ Approximate retail price, standard pocket-sized Labubu figures typically range from US$20 to US$30, depending on design and market.
² Joan Verdon, ‘Labubu Remains King Of The Collectibles, StockX Reports’, (forbes.com), August 2025.
³ Adam Hancock, ‘Human-sized Labubu doll sells for more than $150,000’, (bbc.co.uk), June 2025.
⁴ Bloomberg News, ‘Labubu’s Mega Markups Make Pop Mart a $43 Billion Export Giant’, (bloomberg.com), June 2025.
⁵ See Ezra Greenberg, Kelsey Robinson, Olivia White and Tamara Charm, ‘The ‘value now’ consumer: Making sense of US consumer sentiment and spending’, (mckinsey.com), January 2025.
⁶ Shuyang Wang, Yun Liu, Yingying Du and Xingyuan Wang, ‘Effect of the COVID-19 Pandemic on Consumers’ Impulse Buying: The Moderating Role of Moderate Thinking’, (pmc.ncbi.nlm.nih.gov), October 2021.
⁷ International Data Corporation, ‘Worldwide Smartphone Market Grows 1.0% in Q2 2025, Despite Global Uncertainty and Weak Demand in China, according to IDC’, (idc.com), September 2025.
⁸ Autovista24, ‘What are the global EV market’s most successful brands?’, (autovista24.autovistagroup.com), February 2025.
⁹ Peter Hoskins, ‘Bubble tea chain bigger than Starbucks sees shares jump on debut’, (bbc.co.uk), March 2025.
¹⁰ Scott Murdoch and Sophie Yu, ‘Chinese bubble tea chain Mixue aims to raise $443 million in Hong Kong IPO’, (reuters.com), February 2025.
¹¹ The EV Report, ‘BYD ETM6: A Customizable, Eco-Friendly Solution for Urban Logistics’, (theevreport.com), September 2024.
¹² Lovey Mangal, ‘Pop Mart’s viral collectibles to fuel overseas revenue surge’, (spglobal.com), July 2025.

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