Lessons for Indian producers in China's cultural domination through Labubus

And that, in turn, attests to a structural shift in the Chinese economy, placing it in the league of rich-world economies, even if its per capita income still sits the middle-income bracket, albeit towards the upper end of that income range.

It is not in doubt that China is no longer the low-cost manufacturer of the world, relying on low wages, tremendous scale, and state-enabled superior infrastructure to flood the world’s markets with all kinds of goods at prices no one else could match.

The Asian economic powerhouse today deploys almost a quarter of the world’s production-line robots. BYD Co. Ltd is the world’s most advanced electric car company. CATL (Contemporary Amperex Technology Co. Ltd) has the world’s most advanced battery technology.

Chinese electronics manufacturer Huawei Technologies Co. Ltd produces almost everything in the telecom ecosystem, from logic chips, memory chips, smartphone operating systems, smartphones, and Wi-Fi routers to all the equipment in the telecom network.

It is at the centre of China’s concerted effort to create its own ecosystem to manufacture advanced semiconductors, including laser lithography machines, the chemicals needed, lenses, and everything else. China wishes to rid itself of dependence on western-made silicon for powering the artificial-intelligence revolution, in which Chinese companies are neck and neck with American ones.

China has produced a mid-range aeroplane that can compete with Boeing’s 737 and Airbus’s A320 series aircraft, with carrying capacity and flying range in excess of what Canada’s Bombardier and Brazil’s Embraer, the other two major civilian aircraft manufacturers, have been able to come up with.

China dominated global shipbuilding in 2023, producing 33 million tonnes of shipping tonnage—roughly half the world’s total. South Korea followed with 18mt, Japan with 10mt, and the rest of the world together added just 4mt, according to UN Trade and Development data cited by digital media company Visual Capitalist.

China has been building and deploying more than half the world’s addition to renewable energy capacity these past few years.

Chinese cultural exports

Clearly, China is a powerhouse of industrial engineering and manufacturing sophistication. But this is not enough to register a country’s presence in the big league. For that, a country must produce goods and services that have the power of branding and cultural salience. And that the Labubu toys deliver.

Labubu was created by a Hong Kong-born artist, Kaising Lung, who grew up in the Netherlands, where local folklore inspired his design of the monster toy. Its journey to becoming a runaway hit began when Beijing-based toymaker Pop Mart took it into production. Today, Pop Mart is valued at more than Mattel, the iconic maker of Barbie and Hot Wheels.

The plush toys acquired other companions, came in different sizes, and were sold in “blind box" packaging. The sealed package did not reveal the precise variety of Labubu toy it contained. This spurred multiple purchases from eager collectors, fueling a brisk culture of comparison and informal exchange. Pop stars took a fancy to the toys and spread the craze to their fans.

If you search Amazon in India for Labubu toys, you will find toys made by Pop Mart at prices ranging from under ₹500 to ₹15,000 a piece. There are also all kinds of knock-offs available in the market.

Such is the demand for Labubus inside China that the toy is often smuggled back into China. Thanks to discount sales and exchange rate fluctuations, Labubu exports from China are, at times, cheaper abroad than back home, creating an incentive for smuggling the toys back into China, where the demand for the toys continues to be high.

China is thus revelling in the mass popularity of domestically manufactured cultural products. Labubu has company, as well. One of the most successful recent video games in the world—thanks, essentially, to its popularity in China—draws on the character of the Monkey King, from the medieval Chinese classic Journey to the West. The “West" in this tale refers to India, the homeland of the Monkey King. Bubble Tea is another cultural export from China, although its precise origin was probably in Taiwan, whose Chineseness is a matter of geopolitical contestation.

Labubus also forecast that the Chinese economy is ready to transition from primary emphasis on ‘external circulation’ to ‘internal circulation’, to use the language of the Chinese Communist Party, which has been planning to reduce the economy’s export dependence by boosting domestic consumption.

The collapse of the country's property market makes it inevitable that Chinese growth would rely increasingly on consumption, rather than investment, which had been the mainstay of growth at home in the past.

Nobody could have imagined the arrival of stuffed toys as the harbinger of a consuming class in China that is willing to spend big on branded, social-media-promoted cultural icons, rather than merely on articles of rational utility, to drive domestic growth.

Are there lessons here for Indian producers, too? You can bet your last Channapatna toy that there are!