Regulatory caution dims Hong Kong SPAC outlook, while Chinese tastes drive out foreign brands

“The people who typically benefit from SPACs are the SPAC sponsors. And they always end up much better than the investors who come in later on.”

Key Takeaways:

• Hong Kong’s cautious regulatory environment has stifled an expected boom in SPAC listings, protecting investors but limiting market activity
• Foreign consumer brands in China face increasing challenges from a resurgent domestic market and changing consumer preferences

By Doug Young & Rene Vanguestaine

Hong Kong’s ambition to replicate America’s once-booming special purpose acquisition company (SPAC) market has largely fallen flat, with just a handful of listings since its program launched in 2022. A different sort of struggle is also playing out with foreign consumer brands in China, exemplified by Mannings‘ recent exit, highlighting two distinct but equally challenging facets of navigating complex Chinese markets.

Hong Kong’s stalled SPAC market

SPACs, essentially shell companies raising capital to acquire real private businesses, became wildly popular in the U.S. during the pandemic. Their appeal stemmed from offering a faster and cheaper route to public listing compared to traditional IPOs. However, this exuberance often came at a cost. The U.S. market saw values for a significant number of SPACs drop sharply after completing their de-SPAC mergers — sometimes 80% to 90% — with some acquired companies even going bankrupt. This was largely due to less rigorous vetting compared to traditional IPOs, where disclosure requirements are far more rigorous.

Hong Kong, in a bid not to be left behind, launched its own SPAC program with considerable fanfare at the beginning of 2022. Yet, the outcome has been starkly different. As we step into the New Year, a mere three companies have managed to complete SPAC listings in the past four years. The latest, autonomous driving technology company Seyond (2665.HK), took a full year from its initial announcement in December 2023 to complete its listing in mid-December. This miserable record stands in sharp contrast to Hong Kong’s generally robust market for traditional IPOs in 2025.

We believe the primary reason for this lukewarm performance lies in a more generalized investor wariness toward SPACs following the U.S. experience. Additionally, Hong Kong regulators have adopted a notably more vigilant and cautious approach. Unlike the “buyer beware” ethos prevalent in some markets, Hong Kong’s regulators prioritize investor protection, even if it means slowing down market activity. While SPACs typically promise a cheaper and faster route to public markets, this hasn’t materialized in Hong Kong, where the regulatory oversight has effectively negated those advantages.

SPACs are often viewed as a “risk on” instrument, thriving on market exuberance and abundant cheap money. Historically, the main beneficiaries tend to be the SPAC sponsors, who typically exit with decent returns and warrants, often leaving later-arriving investors holding the bag. This inherent structure is a poor fit for a strict regulatory regime focused on safeguarding investors. We’ve observed a resurgence of SPACs in the U.S. in the current bull market, suggesting that cycles of this type of financial engineering continue to find traction when conditions are ripe. However, in Hong Kong, the gates remain guarded, reflecting a commitment to prudence over speculative fervor.

Foreign brands retreat from China

In a separate, yet equally revealing market shift, Hong Kong-based health and beauty chain Mannings has announced its withdrawal from Mainland China, effective Jan. 15. After more than two decades and once boasting 200 stores in the market, its departure repeats a familiar pattern for many Hong Kong and other Western retail and food and beverage brands that once held high hopes for the vast Chinese market. Initial optimism was often fueled by cultural similarities and Hong Kong’s perceived deeper experience in running businesses.

However, the landscape has profoundly changed. The once-dominant appeal of global brands as symbols of higher quality and cultural aspiration has significantly eroded. Over decades, domestic Chinese brands have notably upped their game, improving quality, design, and tailoring products to local tastes. This transformation has led to a palpable shift in consumer sentiment. Chinese consumers are increasingly favoring local brands, a trend further accelerated by factors such as the pandemic and evolving geopolitical dynamics. Unless a foreign brand offers something truly unique and special, its attractiveness to the modern Chinese consumer is diminished. This trend is particularly evident in sectors like beauty products, where consumers have migrated from Japanese, European and Korean brands to domestic alternatives.

For foreign brands still eyeing the Mainland Chinese market, the advice is clear and unequivocal: do your research 10 times over. It is crucial to understand the contemporary Chinese consumer and the current market mood, which is vastly different from 20 or 30 years ago when the sheer scale of 1.4 billion people mesmerized many. If a brand cannot offer a genuinely unique or top-tier product or service that stands out against increasingly sophisticated domestic competition, then, frankly, we believe it’s not worth the effort. The days of simply riding the wave of China’s economic growth and burgeoning middle class are over. Success now demands deep local insight and an unparalleled value proposition.

About China Inc

China Inc by Bamboo Works discusses the latest developments on Chinese companies listed in Hong Kong and the United States to drive informed decision-making for investors and others interested in this dynamic group of companies.

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