What to Buy in a Down Cycle?

Buy cash cows.
What kind of cash cows? Cash cows with high moats (monopoly). A company can only have a high moat if it operates in a monopolistic market, and it can only be a cash cow as long as what it sells is unaffected by economic cycles.

In terms of product structure, either it sells necessities—things people will buy regardless of whether the cycle is up or down. Or its consumer base is wealthy people, whose spending isn't impacted by downturns.

Looking at it from this angle, what kind of companies in China qualify as cash cows?

They must meet three conditions: a deep moat, products unaffected by cycles, and, importantly, high dividend yields and generous payouts.

During a downturn, pursuing cash cows is essentially like buying an alternative bond—you buy bonds for the interest.

Similarly, the requirement that these companies be immune to downturns is for stability; only stability makes them bond-like.

A deep moat ensures that during a downturn, there are no competitors and no threat from other firms encroaching on your market share—otherwise, how can stability be maintained?

The requirement for high dividends and payouts exists because stability alone benefits you only if the company shares its profits with you.
In a downturn, there's no flood of liquidity, meaning investors don't have many good options. So what happens? Previously dispersed long-term investors will concentrate their picks on cash cows.
What about an upcycle? It's a period of continuous market expansion. If you're running a profitable business, would you distribute dividends to shareholders? No. You'd reinvest those earnings to expand the market—funding marketing and growth instead. Do shareholders benefit? Not really. When companies make money but shareholders don't, new investors lose enthusiasm.
During a downturn, cash-cow companies with deep moats won't try to expand the market. Instead, they retain their earnings and distribute them as dividends. These dividends attract more shareholders. Combined with the lack of better investment options, investor concentration increases. As a result, you end up earning both dividends and capital appreciation.