This report is from this week’s CNBC’s The China Connection newsletter, which brings you insights and analysis on what’s driving the world’s second-largest economy. You can subscribe here.

Foreign investors have struggled to decipher if China can deliver the kind of returns that once seemed assured, especially in the fickle world of consumer brands.

That caution loomed large at the Milken Institute Asia Summit in Singapore last week: With a population of 1.4 billion, China’s potential consumer demand remains too vast to overlook — but increasingly difficult to read.

Chinese households have tightened their belts, cutting back on nonessential spending and becoming, as some investors describe it, “spoiled” by an abundance of high-quality goods sold at steep discounts.

Yet one venture capital firm is testing that skepticism — and drawing attention while doing so. Founded in 2016, Black Ant Capital has been dedicated to China’s consumer landscape and quietly backed some of China’s most talked-about consumer plays since as early as 2017: Pop Mart, Laopu Gold and budget snacks retailer BusyMing Group.

Pop Mart, the company behind China’s blind-box craze, now has a market value of 344.4 billion Hong Kong dollars ($44.2 billion), while jewelry maker Laopu Gold has staged a stunning rally this year, soaring nearly 17-fold from its listing price to reach a market capitalization of $15 billion. BusyMing is poised to become the latest BA Capital portfolio company slated for an upcoming Hong Kong IPO.

It is clear that despite keeping a low profile, the company has turned heads among global investors.

BA Capital manages three renminbi-denominated funds and one U.S. dollar fund. The four funds had outperformed most of their regional peers, according to a company spokesperson, ranking in the top quartile of 479 private equity and venture capital funds in emerging Asia markets surveyed by Cambridge Associates as of the end of the first quarter.

At the Milken Summit, founding partner of BA Capital David He drew a crowd as soon as he stepped off stage — investors and executives eager to trade business cards and pleasantries, hoping to glean insight into his thinking, and perhaps a chance to share in the firm’s remarkable run of returns.

Earlier that day, I caught up with He, who also sits on the board of Pop Mart, at a café a short walk from the Four Seasons Hotel, where the Milken Institute convened this year. Over coffee, he made the case that China’s consumer story is far from over — it’s simply changing and getting more interesting for those who know where to look.

This interview has been translated and condensed for clarity.

What first drew you to invest in Pop Mart?

It was the emotional pull behind Pop Mart’s toys. As children, we all sought comfort from toys, and that instinct doesn’t fade with age. We simply project that need onto other things — pets, hobbies, even décor. Pop Mart’s appeal lies in its design and its presence in intimate spaces, on desks or bedside tables, offering a sense of companionship and familiarity that deepens over time.

Which consumer trends fueled Pop Mart’s rise — and what sustains its success?

Young consumers today are drawn to things that make them feel connected and emotionally fulfilled. They’re willing to spend on something that sparks joy — something they can grow attached to.

Pop Mart has tapped into that trend. The company stands out for its talented designers who create characters that are emotionally resonant and timeless, and for its commercial team, which keeps those characters relevant through new experiences and interactions.

What’s the takeaway for other Chinese brands?

For brands in the mid- to high-end segment, especially those looking to expand overseas, they need to set their sights on the U.S. market early on and go all in. The U.S. remains the most important market with the greatest spending power and cultural influence.

What’s next for Pop Mart?

The demand for its toys, which offer companionship or style, will always exist. The key is nurturing each intellectual property and finding new ways to connect with consumers — better products, richer content, and more immersive experiences, from exhibitions to theme parks. Anything that deepens that sense of interaction will sustain its relevance.

What about Laopu Gold — what explains its success?

Laopu’s rise reflects two powerful shifts among Chinese consumers: a consumer downturn and a cultural turn toward homegrown luxury.

During the pandemic, global luxury brands lost many middle-class customers, but the desire for quality and value remained. Consumers wanted premium products that could preserve their values — like gold jewelry that feels both beautiful and enduring. At the same time, there’s been a surge of pride in traditional Chinese culture, fueled by national confidence and cultural awareness.

In an era of cautious spending, Laopu Gold offered something distinct — jewelry that blends Chinese aesthetics with modern design and refined craftsmanship.

Where do you see Laopu heading from here?

As it adapts to new markets, Laopu will retain its Eastern identity. Like Italian brands that look modern but remain unmistakably Italian at their core, Laopu will evolve while keeping its roots firmly in East Asian heritage.

What do you see in budget snacks chain BusyMing?

Lower pricing has dominated the Chinese consumer market since 2022 and is likely to persist, especially in sectors where further cost reductions can be achieved through enhanced efficiency. Furthermore, we have seen stronger spending power in lower-tier cities in recent years.

Where do you see the next wave of consumer growth?

Spending power in China remains strong and there’s a growing fascination with products inspired by Chinese culture, an emerging but very strong trend among domestic consumers. Furthermore, we see growing interests in self-care and emotional well-being — what I call “emotional healing.” Feminism, too, is gaining strength.

What about tech-related plays?

We’re spending more time looking at consumer electronics — not the technology itself, but how innovation translates into products that meet consumers’ demand. They include autonomous vacuums, drones and smart home devices.

BA Capital has backed several brands, such as Oladance, a Chinese headphone maker, Tenways Electric Bikes, and Yarbo, which produces autonomous snow blowers.

How does BA Capital position for exit options?

About 80 to 90% of our exits have come through IPOs. While we see growing potential for industry consolidation and M&A (Mergers and Acquisitions) opportunities, we don’t view it as a primary exit route. Investing with M&A in mind is the wrong starting point — you won’t be able to find the best companies that way. We aim to invest in the very best players, and for them, an IPO is the natural path.

— CNBC’s Penny Chen contributed to this report.

Jack Dwyer from Infusive analyzed how luxury brands are approaching both China and the rest of the world, as brands shift their tack and products to court a younger audience.

CNBC’s Sara Eisen sat down with Nike CEO Elliott Hill to discuss how the company has navigated tariff increases, manufacturing, and interaction with the Trump administration around trade.

Nick Redman, director of analysis at Oxford Analytica, talked about China’s desire to indigenize chip production, and how it’s rooted in their belief that the U.S. will not be a reliable partner.

World Bank raised China’s growth forecast to 4.8% despite U.S. trade tensions. The new forecast was part of an overall increase in projections for East Asia and the Pacific, bringing the projection closer to Beijing’s official target of around 5% growth for 2025.

BYD’s sales soared in September in U.K. Chinese electric carmaker BYD sold 11,271 cars in the U.K. last month, representing year-on-year growth of 880%. The sales brought its yearly total to just over 35,000 in the country, making the U.K. its largest market outside of China.

Preliminary figures for the Golden Week holiday pointed to sluggish consumer spending. Average daily domestic passenger trips, retail sales and catering revenue rose at a much slower pace than the Labor Day holiday in May, according to Nomura. The number of cross-border flights in the first six days of the eight-day holiday also remained below the pre-pandemic levels.

Chinese stock exchanges were closed on Oct. 8 for the Mid-Autumn Festival, with trading resuming Thursday. The 10-year government bond yields were trading nearly 2 basis points lower at 1.878%.

Oct 13: Exports, imports (Sept.)

Oct 15: Producer price index, consumer price index (Sept.)

Oct 20: One-year and five-year loan prime rate; house prices, industrial output, retail sales, fixed-asset investment, urban unemployment rate (Sept.); third-quarter GDP