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In the context of China’s rapidly expanding Internet landscape, individuals often excluded from social connections in real life—referred to as “underdogs,” or “Chinese version of incel”—turn to the Internet to cultivate a sense of identity. This study investigates how cultural and social identities are constructed through collective practices in online spaces by examining the formation and evolution of the “Small-Town Swot” (STS). Originally a self-deprecating term for academically capable but socially and economically disadvantaged individuals from rural areas, STS evolved into a collective identity. Through content analysis of online song creation and interactions, this study reveals how STS narratives initially targeted Ding Zhen, who is a Tibetan horseman popularized in 2020 and seen as a symbol of social inequality, as an antagonist. However, over time, empathetic interpretations mediated by cultural production and consumption transformed him into a shared sign within the STS identity. This process revealed the existence of inequality online and offline, granted STS a sense of moral superiority, and redefined its symbolic boundaries, incorporating a gendered dimension. The findings highlight the dynamic definition of identity boundaries, demonstrating how “underdog” groups transform their self-perception and sociocultural positioning through cultural production. This transition from antagonism to inclusion underscores the complex interplay of morality, social justice, power dynamics, and symbolic representation in digital spaces.