Chinese Online Rushes to Hong Kong IPO: Losses Widen, Can Betting on Short-Form Drama Exports Break the Deadlock?

(Source: Liang Jing)

■ Officially submitting H-share listing application to HKEX

■ Transitioning from digital publishing to AI-driven content leader in the era

■ The road for overseas short dramas is far from smooth, facing severe challenges

Author | Chenxi

Editor | Chen Qiu

Liang Jing ID: DMS-012

On February 27, China Literature officially submitted its H-share listing application to HKEX, aiming to list on the Main Board, with Citigroup as the sole sponsor. According to the plan, the funds raised will mainly be used for overseas short drama ecosystem development, AI technology upgrades, and working capital supplementation.

As the “Number One Digital Publishing Stock” in A-shares, this marks China Literature’s return to the capital market after 11 years since its listing on the ChiNext in 2015. The company aims to build a dual “A+H” capital platform, leveraging HKEX’s international advantages to expand financing channels and accelerate global expansion.

However, behind China Literature’s secondary listing is not a story of strategic expansion full of confidence, but an emergency rescue amid ongoing losses and tight cash flow. According to its 2025 earnings forecast, the company expects a net loss of 580 million to 700 million yuan for the full year, an increase in loss compared to 2024.

This HKEX listing will directly help China Literature “inject blood” into its finances, alleviating financial pressure. More importantly, it will assist in attracting global investors, laying a foundation for future globalization, and promoting the localization of overseas short drama platforms and the global deployment of AI technology.

Focusing on overseas short drama market

China Literature is a leading digital entertainment platform driven by AI, mainly providing online literature content domestically and short dramas overseas, aiming to build the next-generation full industry chain digital content ecosystem.

Founded in 2000 and listed on the Shenzhen Stock Exchange’s ChiNext in January 2015, China Literature became the first digital publishing company listed in the A-share market. Over the past 25+ years, it has built a vast library of original digital content and a rich network of creators. With continuous technological innovation, especially in AI applications, China Literature has transformed from a digital publishing enterprise into a content leader in the AI era.

By empowering online literature, audiobooks, comics, AI manga dramas, animation, and short dramas with AI technology, China Literature has expanded its business from China to the global stage. It connects well-known creators, publishers, distribution channels, and global users, creating an AI-driven business covering content creation, IP incubation, multi-format IP development and operation, and global distribution. This enables China Literature to continuously deliver high-quality digital content worldwide.

According to Frost & Sullivan data, based on 2024 revenue, China Literature ranks third in China’s online literature copyright-driven content platforms, with a market share of 1.6%. In overseas short drama platforms, as of September 2025, China Literature ranked eighth by revenue and second in monthly active users during the first seven months after launch.

In online literature and related businesses, China Literature boasts a rich digital content library, with over 5.6 million digital items as of the latest feasible date, mainly comprising online literary works. With years of accumulation, it also owns a large audio content library, most of which are adaptations of its online literary works.

China Literature mainly provides abundant online literature and audio content through diverse third-party channels and its own platforms. Additionally, it earns revenue by licensing its online literary works and providing related digital data. This core business contributed 480 million yuan in revenue for the nine months ending September 30, 2025, accounting for 47.5% of total revenue.

In terms of short dramas and IP derivatives, China Literature was among the first in China to produce and distribute short dramas in 2021. In 2022, its short dramas achieved significant success, making China Literature one of the few companies in China to reach the 100 million yuan revenue milestone. Since 2022, leveraging its rich digital content and valuable IP, China Literature has expanded into overseas short drama markets, continuously producing high-quality content that attracts local audiences. As of September 30, 2025, revenue from short dramas and IP derivatives surged to 474 million yuan, a year-on-year increase of 62.9%.

As of the latest feasible date, China Literature’s overseas short drama app FlareFlow once ranked first in the U.S. free entertainment app daily charts on major app stores. It now has over 33 million registered users and offers about 5,200 short drama episodes. The company also selects high-quality IP from its digital content library and IP reserves for further development, adapting them into various formats such as comics, AI manga dramas, animation, short dramas, movies, and merchandise, generating revenue from these derivatives.

Cumulative losses exceed 3 billion yuan

Behind the impressive growth figures, there are deep-rooted difficulties—namely, a money-burning game fueled by massive marketing expenses and a serious “revenue but no profit” situation.

Financial data shows that in 2024, China Literature lost 243 million yuan; in the first three quarters of 2025, revenue increased by 25.12% year-on-year, but net loss widened to 520 million yuan.

In its third-quarter report, China Literature stated that the significant increase in revenue was mainly due to overseas income growth from its subsidiary overseas short drama platform FlareFlow. The net loss was primarily caused by increased operating losses in overseas business during the period.

In the first three quarters of 2025, China Literature’s sales expenses reached 660 million yuan, up 93.65% year-on-year. The company explained that this sharp increase was mainly due to higher overseas marketing costs.

According to its 2025 earnings forecast, China Literature expects a full-year loss of 580 million to 700 million yuan, wider than 2024. The company said it is in a critical stage of overseas business expansion, and to maintain competitive advantage, it has significantly increased promotional investments. Since these businesses are still in the investment phase, costs cannot be fully offset by revenues in the short term, leading to substantial losses in 2025.

China Literature also warned that the expected widening of losses will reduce its net assets attributable to shareholders, and given its already low net asset base, this loss will further dilute per-share net assets, potentially weakening its ability to withstand external economic fluctuations and industry cyclical risks.

Analyzing China Literature’s profitability, since its 2015 IPO, its performance has been like a roller coaster, with more years of losses than profits, deeply entrenched in a loss cycle. According to the latest financial data and historical statistics, the company’s accumulated losses since listing have exceeded 3 billion yuan, revealing fundamental issues in its business model and development strategy.

The massive losses are not accidental but reflect strategic repeated missteps, broad operational approaches, and governance concerns. The company seems eager to chase every market trend—from early ventures into ACG, gaming, education, to recent focuses on metaverse, AI, and short dramas. However, these strategies are often limited to capital operations and have not translated into sustainable profitability.

Currently, the company’s heavy investment in overseas short drama business has driven revenue growth but also led to a “money-burning for scale” dilemma.

Challenges in going global with short dramas

During the 2026 Spring Festival, China’s short drama market experienced explosive growth. DataEye Research Institute reported that the total play volume of short dramas during the 2026 Spring Festival reached 8.67 billion views. After several years of development, China’s micro-short drama market has rapidly expanded, with the total annual output value of micro-short dramas and manga dramas reaching 100 billion yuan in 2025—surpassing the total box office of films during the same period. In this booming market, companies with content accumulation, such as Hongguo, Dianzhong, and Mimeng, have gained early advantages.

According to Frost & Sullivan, the overseas short drama market is still in its early stages, expected to grow from 14 billion yuan in 2024 to 120.8 billion yuan in 2029, with a compound annual growth rate (CAGR) of 53.9%. As domestic production systems mature and monetization frameworks improve, China’s short drama market is projected to expand from 46.4 billion yuan in 2024 to 150.4 billion yuan in 2029, with a CAGR of 26.5%.

This market trend offers ample growth opportunities for participating companies. China Literature states that with its leading market position, rich digital content library, and AI application capabilities, it is well-positioned to seize these opportunities and further solidify its growth potential.

Indeed, as a pioneer in China’s digital publishing industry, China Literature’s deep accumulation in online literature is a core advantage that sets it apart from other short drama companies.

However, it must be recognized that its core strength in online literature cannot offset the cost pressures brought by chasing the short drama trend and the historical burdens of its business transformation, ultimately leading to continued operational decline.

Looking ahead, China Literature’s overseas short drama journey will not be smooth sailing and will face severe challenges.

First, the rapid growth of the overseas short drama market is attracting many competitors, turning the market from a “blue ocean” into a “red ocean.” Not only are giants like TikTok actively involved, but more Hollywood professional teams are joining, leading to increasing content homogenization and user retention difficulties.

The “2025 China Short Drama Going Global Report” shows that besides top platforms like ReelShort and DramaBox, local platforms from different regions are accelerating their entry, such as Ukraine’s MyDrama, Korea’s Vigloo supported by major audio companies, Japan’s UniReel, and India’s MebigoLabs’ KukuTV, which ranked third in downloads during the same period, indicating that short dramas are rapidly penetrating globally.

Second, going global with short dramas is not just translation but also cultural re-creation. How to accurately adapt to different countries’ cultural customs and regulatory policies, achieve true localization, and avoid compliance risks is a long-term challenge requiring sustained investment and meticulous operation.

Finally, monetization efficiency in overseas markets still has room for improvement. How to expand user base, optimize hybrid monetization models, and increase per-user value to achieve a profitable cycle are key to sustainable overseas expansion.

This IPO in Hong Kong also holds multiple significances for China Literature.

First, its current financial situation is precarious. The HK listing can open up financing channels to urgently “refuel” its “money-burning” strategy—this is the most immediate and urgent purpose.

Second, it can help the company reconstruct its valuation logic, transforming from an “A-share concept stock” to a global “AI player.” In the A-share market, China Literature is often viewed as a “transformation digital publisher” or a concept stock chasing trends like short dramas, AI, and the metaverse, with volatile valuations. Listing in Hong Kong means actively entering the international capital pricing system, redefining itself as a “globally AI-driven digital entertainment platform.”

More importantly, the internationalized capital market of HKEX can help China Literature attract global investors, enhance its international brand influence, and lay a foundation for future globalization. It will especially support the localization of overseas short drama platforms and the global deployment of AI technology. Listing in Hong Kong can significantly boost the company’s overseas brand recognition and business credibility, providing strong capital backing for communication with overseas partners, content creators, and regulators.