Short dramas go overseas with continuous "burning money"; China Literature plans to list in Hong Kong to "raise funds"

(Source: Economic Information Daily)

From “the first Chinese digital publishing company” to “an AI-driven global cultural and entertainment platform,” Chinese Online (300364.SZ) is entering a critical period of transformation. On one side, its overseas short-drama business is surging; the flagship platform FlareFlow launched less than a year ago and has already won over 33 million users. On the other side, however, there are performance losses and financial pressure brought on by sustained “burning of cash.” During a period of expanding new business and mounting performance pressure, Chinese Online submitted its filing to the Hong Kong Stock Exchange, planning to list in Hong Kong to “recapitalize.”

Founded in 2000 and known as the “first Chinese digital publishing company,” Chinese Online has, in recent years, been undergoing a deep transformation from a “traditional digital publishing company” to a “global digital cultural and entertainment platform driven by ‘AI + IP + short dramas.’” In 2021, Chinese Online became one of the first batches of companies in China that produced and distributed short dramas, and it soon set its sights on overseas short-drama markets. In August 2022, CMS (Maple Leaf Interactive), a company under Chinese Online, launched a global short-drama app—ReelShort. After CMS became independently operated, Chinese Online still holds a minority stake.

From 2023 to 2024, competition in China’s short-drama market intensified. Chinese Online’s related businesses declined, and it began shifting the focus of its domestic short-drama business from the to-C model to premium short dramas and the to-B model, prioritizing cooperation with leading third-party platforms supported by internet giants. Overseas, Chinese Online has successively launched two major platforms—Sereal and UniReel—to explore short-drama markets in overseas regions such as Southeast Asia and Japan. In April 2025, Chinese Online launched its flagship overseas short-drama business FlareFlow. After FlareFlow went live, it quickly achieved explosive growth. At its highest point, it ranked first on both the U.S. free charts on Google Play and the App Store for entertainment apps. As of February 18, 2026, cumulative registered users have exceeded 33 million.

Behind Chinese Online’s “high-traffic” overseas short-drama platforms is “high cost” and “high marketing.” In its Hong Kong stock listing application, Chinese Online openly admitted that the company’s overall business model is highly dependent on distribution costs and marketing promotion expenses. In the first three quarters of 2023, 2024, and 2025, the company’s distribution costs were 564 million yuan, 472 million yuan, and 308 million yuan respectively, accounting for 72.3%, 60.6%, and 46.4% of its cost of sales.

With continued “burning of cash,” Chinese Online has fallen into a dilemma of “increasing revenue but not profits.” At the end of January 2026, the company’s earnings pre-announcement showed that it may face “two consecutive years of losses.” For fiscal year 2025, its net profit attributable to shareholders is expected to be a loss of 580 million yuan to 700 million yuan. The year-on-year increase in losses is projected to widen by 139% to 188%. The company attributes the loss to expanding the scale of its overseas business, and increasing promotional investment in its overseas short-drama operations.

While profitability is under pressure, the company’s debt scale has also continued to rise. According to data from Tushare, the company’s asset-liability ratio increased from 38.45% at the end of 2024 to 66.56% in the third quarter of 2025. As of September 30, 2025, the company’s bank and other borrowings were 432 million yuan. A large portion of the bank borrowings consists of short-term loans, which also puts pressure on the company’s working capital and cash flow. As of January 31, 2026, the company’s outstanding debt was 528 million yuan.

On December 15, 2025, Chinese Online announced that it was planning to list in Hong Kong. The purpose is to further advance the company’s global strategy and layout, and to enhance its overall competitiveness. On March 1, 2026, the company submitted its filing to the Hong Kong Stock Exchange. Although in its 2025 earnings pre-announcement the company stated that the investments for expanding the scale of its overseas business are intended for long-term planning, given its deteriorating financial performance, the market has interpreted the company’s plan to list in Hong Kong as fundraising to “recapitalize.”

In its Hong Kong stock listing application, Chinese Online stated that after listing, the funds will be used to develop and improve AI technology to strengthen its content creation and distribution capabilities; to build an overseas short-drama ecosystem; to strengthen the content ecosystem; to repay part of its bank and other borrowings in the coming year; and for working capital and general corporate purposes.

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