Equities
Soft signal: How Labubus became a barometer for the global economy
10 min read 21 Oct 25
In 2025, few would expect a plushie keychain to offer a window into the state of the global economy. Yet, Labubus, by Chinese toymaker Pop Mart, have become an unlikely proxy for shifting consumer behaviour, the rise of cultural commerce and China’s expanding soft power, writes Noura Tan. Speaking to Jamie Zhou, a fund manager in the Asia Pacific Equities team, they unpack China’s next wave of consumer exports where sentiment drives strategy amid rising protectionism.
Plushie
A soft, stuffed toy typically made from plush fabric. While often associated with children, plushies have also become collectible items and cultural symbols in various consumer markets.
Labubu, a US$301 collectible toy created by artist Kasing Lung began as a niche curiosity in China’s designer toy scene has since become a breakout success in global consumer markets – and arguably the most visible export of a new kind of Chinese branding strategy.
First gaining popularity among Chinese consumers, Labubus' ascent was catalysed by celebrity endorsements and viral TikTok unboxings, propelling it into a global cultural asset. That initial buzz has been sustained by character-driven storytelling, limited product drops and the addictive appeal of the blind box format where buyers don’t know which variant they’ll receive until opening, pushing the same emotional levers as a McDonald’s Happy Meal.
The resale market has further amplified demand, with rare figures fetching substantial sums online2. A four-foot-tall version was recently auctioned for US$150,0003 in Beijing, while fans queue for hours outside retail stores worldwide in anticipation of new releases.
This momentum has translated into an outsized financial performance rarely seen in the toy sector. Pop Mart now commands a market capitalisation of approximately US$40 billion, nearly double the combined value of Mattel, Hasbro and Sanrio. The firm reported a gross profit margin nearing 70% last year, outpacing the 45% margin of industry peer, Miniso, and surpassing high-profile Chinese manufacturers like Xiaomi and BYD, both of which operate closer to 20%4.
Labubus may be just a toy, but the forces behind it are anything but trivial. What began as designer kitsch has evolved into a commercial juggernaut and more importantly, a proxy for shifting consumer appetites, the rise of Chinese soft power and the growing entanglement of culture and commerce in the global economy.
“What began as designer kitsch has evolved into a commercial juggernaut and more importantly, a proxy for shifting consumer appetites, the rise of Chinese soft power and the growing entanglement of culture and commerce in the global economy.”
Soft power in hard times
Labubus’ trajectory mirrors past speculative toy crazes like Ty’s Beanie Babies and Hasbro’s Furbies, but its success is unfolding in a more precarious macroeconomic environment. Where earlier fads reflected exuberant consumer cycles, Labubus are thriving in a climate marked by financial insecurity, post-pandemic behavioural shifts and recessionary headwinds.
This phenomenon represents a modern reprise of the ‘Lipstick Index’, Estée Lauder chairman Leonard Lauder’s theory that consumers gravitate toward small, emotionally satisfying indulgences during economic downturns. Coined during the early 2000s recession, the pattern resurfaced again during the 2008 financial crisis and resonates again today, with Labubus emerging as the plush iteration.
This shift has been amplified by the pandemic, which disrupted traditional links between sentiment and spending. As uncertainty persists, household income is no longer the sole driver of consumption. Instead, purchasing decisions are shaped by savings, the rise of online shopping and a ‘value now’ mindset where consumers seek maximum emotional return for minimal financial outlay5. This logic has favoured low-cost, high-aesthetic products that offer social currency and emotional relief at accessible prices.
At the same time, impulse buying has surged post-pandemic, not despite rising uncertainty but because of it, fuelled by anxiety, a lingering sense of lost control6 and the frictionless nature of social media-driven commerce.
Chinese firms have proven adept at capturing this behavioural pivot. Accessibly priced yet aspirationally marketed, Labubus’ success marks a broader shift across China’s consumer sector where firms are looking to build brand equity abroad while navigating the constraints of an increasingly fragmented global trade environment.
However, this shift is not a strategic breakthrough, but rather a continuation of Chinese firms’ longstanding, often understated leadership in consumer innovation and market strategy, now becoming more visible on the global stage.
Crucially, success in China’s vast and highly competitive domestic market has provided a robust foundation for overseas expansion. With access to a vast, digitally fluent consumer base, companies are able to refine products, scale operations and build brand equity at home before entering international markets, often with a level of maturity and agility that gives them a competitive edge abroad.
Repackaging ‘Made in China’
Since China’s rise as a manufacturing powerhouse in the 1980s, ‘Made in China’ became shorthand for cheap, fast and often disposable. In recent years, Chinese firms have made a tactical pivot that reflects a deeper structural shift in how they compete globally, shaped by rising protectionism, fractured trade relations and growing uncertainty.
The strategy driving this shift is clear: innovate at home, localise abroad.
Pop Mart exemplifies this shift. Its global success hinges on emotive appeal, not just cost. Labubu, originally inspired by Danish fairy tales, has evolved into a globally adaptable character, with country-exclusive designs tailored to local tastes. This synergy between domestic innovation, supply chain and market-specific localisation is emerging as a defining trait of China’s most globally competitive brands, says Jamie Zhou, Deputy Fund Manager of the M&G China Fund.
Other Chinese firms have been applying similar strategies with equal impact. Xiaomi, now ranked third in global smartphone market share7, delivers Apple-adjacent design and functionality at price points tailored to middle class consumers in markets like India and Spain. BYD, once dismissed as a second-tier EV maker, now outpaces Tesla in global EV sales8, due to its focus on regional regulatory needs, consumer preferences and strategic government partnerships in Europe, Southeast Asia and Latin America.
Even in unexpected sectors, the same model holds. Mixue, a budget tea and ice cream chain that began as a street cart in Zhengzhou, has become the world’s largest food and beverage chain by outlet count, outnumbering Starbucks and McDonald’s9. Its rapid growth stems not only from its ultra-low prices and fully integrated supply chain, but also from a compelling cultural persona, featuring a beloved snowman mascot, limited-time regional flavours and a TikTok-fuelled fanbase that blurs the line between consumer and community.
Zhou sees this localisation-first approach as a defining feature of the new consumer 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 observes, adding that this strategy is not limited to design-led firms.
“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 explains.
Zhou argues that these firms collectively represent a new consumer export model, one that blends industrial efficiency with emotionally resonant design, scaled through digital ecosystems and tailored to regional realities.
The market is already rewarding this new model. In March 2025, Mixue debuted on the Hong Kong Stock Exchange with a valuation approaching US$10 billion10, underscoring investor appetite for companies that pair market fluency with the efficiency and scale of the Chinese manufacturing ecosystem. By competing not only on price but also on aspiration, these firms are setting new benchmarks for global competitiveness where cultural relevance is becoming just as critical as cost control.
“By competing not only on price but also on aspiration, these firms are setting new benchmarks for global competitiveness where cultural relevance is becoming just as critical as cost control.”
China adapts as protectionism rises
Whether Labubus extend their reign or are rendered a whimsical outlier in a serious trade environment, they reflect a broader reality: Chinese consumer influence and cultural exports remain resilient, even as Western governments intensify efforts to decouple. This reality has been accelerated – not stalled – by rising protectionism led by the US and increasingly echoed in Europe.
Since returning to office, President Donald Trump has expanded his tariff agenda, imposing sweeping duties on nearly all imports, framed as a national security imperative and a corrective to longstanding trade imbalances.
In parallel, the administration has doubled down on reshoring, offering tax incentives and regulatory support to bring manufacturing back to US soil. Trade agreements with allies such as the European Union and Japan have unlocked billions in investment commitments, reinforcing a broader strategy to reduce reliance on China and build resilience against geopolitical shocks.
Yet while governments tighten trade rules, Chinese firms are not retreating but adapting. In 2025 alone, BYD has opened assembly plants in Hungary, Thailand and Brazil, with more underway in Turkey and Cambodia. These are not detours, they are strategic pivots to serve local markets, sidestep US tariffs and hedge against geopolitical volatility. Xiaomi has similarly restructured its supply chain, embedding production hubs in Vietnam and India to build operational resilience and regional relevance.
This localisation extends beyond logistics. Just as with Pop Mart and Mixue adapt their offering to local tastes and cultural norms, BYD has engineered EVs with European aesthetics and safety standards in mind11, while Xiaomi has long rolled out software for European devices to meet regional compliance and user preferences.
Zhou observes that, “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 is not globalisation as usual. It’s a post-national business model where R&D remains rooted in China, but production, compliance and marketing are increasingly regionalised. Western tariffs may have slowed traditional exports, but they have accelerated a shift toward services, IP-driven business models and cultural exports – the kind of soft power commerce that is harder to regulate and more agile than steel or semiconductors.
What emerges is a two-speed system where at the top, policymakers tighten trade rules, restrict tech-sharing and pursue self-reliance, while at the bottom, consumers continue to engage with Chinese products – not merely out of necessity but increasingly from genuine preference and emotional attachment. Pop Mart expects over half its revenue to come from international markets this year, with projections rising to nearly 70% by 203012.
For investors, the implications are twofold. First, the old metrics for evaluating Chinese consumer brands – price competitiveness, scale and operational efficiency – are no longer sufficient. Today’s leading players are competing on emotional affinity, cultural fluency and regional relevance, especially in uncertain times.
Second, these firms are building defensible value not just in hard assets, but in soft ones: IP portfolios, design languages and fan communities. In an environment where physical supply chains are increasingly politicised, cultural products are harder to tariff, regulate or replicate.
“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 transitioning from producers to protagonists, their growth models rooted in regional relevance, not just volume.
Labubus will ultimately fade into the ranks of passing fads – plush toys rarely endure. But the strategic infrastructure behind the character's success will remain: an emotionally attuned user experience, a localisation playbook, scalable character IP and manufacturing agility.
In many ways, what we are seeing is the emergence of a new kind of Silk Road, one built on soft power and consumer resonance, designed to ease the geopolitical friction that often shadows China’s ascent. 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, this raises a clear thesis. In a world of rising trade barriers and localised consumer demand, the companies best positioned to lead will be those capable of delivering emotional resonant design, region-specific strategies and adaptive supply chains.
In 2025, the most telling signal of that shift might just be a blind box with a plushie keychain inside.
The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested. Past performance is not a guide to future performance. The views expressed in this document should not be taken as a recommendation, advice or forecast, nor a recommendation to purchase or sell any particular security.
Contributor
Jamie Zhou, Deputy Fund Manager, M&G China Fund
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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