CNBC's The China Connection newsletter: The AI consumer bet might surprise you

Hi, this is Evelyn, writing to you from Beijing. Welcome to the latest edition of The China Connection — a snapshot of what I'm seeing and hearing from local businesses.

The rise of artificial intelligence could be creating an unexpected winner in China: the experience economy.

Money might be piling into AI, but for BAI Capital's Annabelle Yu Long, the Chinese consumer is still king.

An "unintended consequence" of AI is the transformation of how humans interact with each other — and the businesses around them, she said. That means now is the "best time" to get in on the consumer trends of the future, which will require much more focus on offline experiences.

Beijing-based BAI Capital, whose roots lie in German media conglomerate Bertelsmann, raised $800 million in May for its latest U.S. dollar fund — a relative rarity in China's venture capital world, which has recently leaned more on local investors for Chinese yuan-denominated funds.

Long said she looks for three things when making investments: that the companies are regulation-neutral, consumer-facing and market-oriented.

"Not all technology has to be nerdy, has to be aerospace, quantum computing, so-called hard core," she said. "If I was able to invest into the next TikTok, ByteDance ... I'd be more than happy to do it, in addition to the Nintendos, the Sonys and Panasonics arising from China. I see it happening now."

Global investors have long eyed the potential of China's hundreds of millions of consumers. But spending has remained sluggish since the pandemic, while money has flowed instead into AI, chips and hardware. Retail sales turned negative in May before eking out 1% growth in June.

In an effort to boost spending, China launched a nationwide trade-in subsidy program in 2024, encouraging consumers to trade in old goods for new ones. Local authorities, meanwhile, are trying other ways to get residents and foreign tourists to spend.

The traditional Wangfujing shopping district in downtown Beijing is trying to revamp itself with more in-person experiences, such as a forthcoming themed area featuring virtual reality and characters from iQiyi's online dramas.

Sharon Tan, CEO of consultancy Beijing Lyvion International, which is working on the Wangfujing project, said she is also looking to get Vogue parent Condé Nast on board. Young people's demands ultimately shape consumer venues, Tan told reporters this month. Condé Nast did not immediately respond to a CNBC request for comment.

In new measures published July 13, Chinese policymakers made clear that their focus over the next five years is to support experience-focused consumption, such as in the performing arts and sports.

'Genuine offline social connections'

Belgium's Tomorrowland electronic music festival came to China last year, with its first event in Shanghai. It was held in partnership with Dino Ying's Hero Esports and INS Land, which is backed by BAI.

"As artificial intelligence becomes increasingly widespread, online content will become more homogeneous, and there will be more and more AI slop," Ying said. "We therefore believe consumers will increasingly seek a return to genuine offline social connections. People will have a growing need for face-to-face interaction."

The emphasis on offline is striking, coming from someone heavily involved in China's first premium video game Black Myth: Wukong, which became an overnight success two years ago.

But Hero Esports is moving quickly. Initial conversations about Tomorrowland's China expansion only started in early 2025, Ying said. By November that year, the first festival was live, and it's due to return in October this year. Ying's INS Land complex also operates a nightclub and other entertainment venues throughout the year.

If tickets to the venue now cost 200-300 yuan ($30-$44), they will cost 10 times more in the future, BAI's Long said. "Because offline experience, really to smell the sweat [and] dance in real music with real people — [that] will become the ultimate luxury."

U.S. trade official says 'very few' Nvidia H200 AI chips have been shipped to China"The bottom line is very few shipments against licenses for H200s and equivalents have taken place. It's a very small quantity of chips," Under Secretary of Commerce for Industry and Security Jeffery Kessler said at a congressional hearing.

'Listing is a must': Chinese humanoid startups are rushing to launch IPOsLimX founder Will Zhang compared the situation to Chinese electric car startups. "Once the technology is mature, if [the company] doesn't list, then like WM Motor, it may disappear," he said in Mandarin, translated by CNBC.

BrainCo bets the future of brain tech is wearableThe company's bionic hands, approved by the U.S. Food and Drug Administration, read an amputee's neural and muscular electrical signals and translate intended movements into finger motions.

July 16 - 29: 2026 APEC Digital Weeks in Chengdu

July 27: China's memory chip company CXMT is reportedly to list