The country’s younger generation of shoppers is on a spree of what analysts call emotional consumption, defying a wider malaise in China’s economy. Revenues at Gen Z favorites such as toymaker Pop Mart International Group, jewelery firm Laopu Gold Co. and drinks chain Mixue Group have soared, fueling breakneck moves in their stock prices.

The spending boom offers a glimmer of hope for the world’s second-largest economy, where an export-led growth model is under threat from trade tensions with the U.S., even amid a recent reprieve. Beijing has made boosting consumption and stimulating domestic demand priority No. 1 as it attempts to redefine its economic model.

The moves also underscore the huge profits on offer for investors in China’s stock market, despite recent selling pressure caused by tit-for-trade moves between the U.S. and China. The tariff pause between the world’s two largest economies was needed to put a wider rally in the country back on track. Gen Z consumer stocks, though, had already roared ahead.

Devoted to hobbies

Gen Z consumption in China is a tale of two extremes. The over 250-million-strong army of shoppers, often defined as those born between 1995 and 2010, pinch pennies when it comes to everyday items like bubble tea or noodles. They’re willing to spend big on their hobbies, blowing hundreds or even thousands of dollars on toys, celebrity merchandise and trendy jewelry.

These consumers aren’t all that different from their Gen Z counterparts in the U.S., an extremely online bunch who drink less alcohol than their parents, look for small-ticket bargains, have few plans to buy property, and splurge on niche brands and hobbies their parents just don’t understand. 

“The new consumer is self-indulgent, devoted to hobbies, less price sensitive, and spends on things they can connect to emotionally or those that provide sensory pleasure,” said Li Shouqiang, a fund manager at Shenzhen JM Investment management Co. “Essentially, anything that their elders consider frivolous.”

Liu Meixuan, a 26-year-old e-commerce employee, offers a typical example: She buys cheap drinks from tea chain Chagee Holdings Ltd., using coupons to lower the price even further—but she also estimates she has spent as much as $9,600 on trading cards featuring Korean pop stars.

Gen Z spending alone won’t be enough to turn around China’s economy, which is still recovering from a years-long property slump, fighting against deflation and dealing with the impact of U.S. tariffs. Although the world’s two largest economies have agreed a temporary reduction of levies, the detente came too late to avoid a hit to Chinese manufacturers and a lasting deal is still far from guaranteed.

The idiosyncratic spending habits of Gen Z also mean it is tough for investors to spot winners in advance, since a disparate group of companies reap the benefits. Pop Mart and Bloks Group Ltd. make toys. Mixue and Guming Holdings Ltd. sell tea and other drinks. Laopu Gold, a jeweler offering traditional Chinese designs, became a Gen Z must-have after blowing up on social media. 

But the potential gains on offer for investors are eye-popping. Those five stocks have all more than doubled this year. Mao Geping Cosmetics Co., whose celebrity make-up artist founder has burnished its appeal with Gen Z, has seen its shares jump almost 80%. Auntea Jenny (Shanghai) Industrial Co., another tea seller which listed in Hong Kong last week, is already around 13% higher since then.

“These businesses have clearly read the room and adapted to trends, which are likely here to stay,” said Mark Tanner, managing director of consultancy China Skinny in Shanghai.

Their wild stock moves have shaken up the corporate landscape in China, creating a new crop of national champions. Pop Mart was worth less than either Mattel Inc. or Hasbro Inc. late last year but is now bigger than the two companies combined. Laopu Gold, a minnow compared to industry giant Chow Tai Fook Jewellery Group Ltd. at the time of its listing in June, now has a greater market value despite having a fraction of its stores.

Gen Z’s obsession with hobbies has, predictably, led to clashes with their parents. 

Zhuo Xiaodou, a 20-year-old in Shenzhen, is so dedicated to collecting Formula One model cars—at a cost of as much as a few hundred dollars a pop—that he scrimps on food to pay for them. To his parents, who send him money to get through college, this is just “a waste,” said Zhuo. “They don’t see the point.”

Qi Jiaxiang, a 17-year-old high school student in the Hebei province, said his father’s childhood in the countryside makes it hard for him to relate to his son’s hobbies, which include a growing collection of badges featuring comic book characters.

Investors are siding with the younger generation. Shares that were hot plays for Gen X and Gen Y consumption have dragged in comparison. High-end liquor maker Kweichow Moutai Co., once an investor favorite, hit an all-time high in 2021 and has lost a third of its value since then. Those of appliance maker Haier Smart Home Co. are down this year, while rival Midea Group Co.’s shares are up just a few percent.

The new new thing

Investors are now turning their attention to a series of initial public offerings planned by Chinese consumer companies that have Gen Z appeal, hoping to replicate Laopu Gold’s more than 15-times jump since its listing last year.

Collectible card maker Kayou Inc., which sells in Pop Mart-style blind boxes, has filed a prospectus with the Hong Kong stock exchange, as has popular fast food chain Guangzhou Xiao Noodles Catering Management Co. Toymaker Miniso Group Holding Ltd. is considering spinning off and listing its Top Toy brand in Hong Kong, Bloomberg News previously reported. 

These deals are all likely to benefit from a continued spending spree among the cohort, who say they have no plans to change their consumption behavior anytime soon.

Icy Yang, a 30-year-old consultant in Shanghai, is among the Pop Mart mega-fans who helped drive a surge in the company’s profits last year. She already owns dozens of the company’s dolls, and recently teamed up with friends to participate in an online sale of its latest Labubu doll, a popular model.

“My only regret is that it never occurred to me to put as much as I’ve spent on the toys into Pop Mart’s shares,” she said. “I’d be so rich.”