Industrial Securities: What investment opportunities will the outbound chain have in 2026?

1. China’s Foreign Trade Moves Toward Diversification and Upgrading

In 2025, despite a complex external environment, China’s foreign trade continued to outperform expectations, demonstrating strong resilience. Facing sluggish global economic recovery and escalating tariff frictions, China’s total exports reached a record high, up 5.5% year-over-year. During the same period, China’s trade surplus first exceeded $1 trillion, a significant increase of 19.8% year-over-year.

Foreign trade has become a key engine of economic growth. On a macroeconomic level, in 2025, net exports of goods and services contributed 1.64 percentage points to GDP growth, the second-highest level since 2007, only behind 2021. At the listed company level, export chain profits in Q3 2025 grew by 12.96%, markedly outperforming the non-financial A-share market (1.92%), maintaining leadership for nine consecutive quarters, with the growth gap widening to 11.03 percentage points.

Regionally, the diversification of external demand further strengthened. Emerging markets’ incremental exports effectively compensated for declines in the U.S. market. Due to tariff and trade frictions, China’s direct exports to the U.S. in 2025 declined sharply by 19.79% year-over-year, dragging overall exports by 2.91%. The U.S. share of China’s exports further decreased by 3.53 percentage points to 11.15%. Meanwhile, emerging markets experienced rapid growth, becoming new pillars of export expansion. Exports to Africa, ASEAN, and the Middle East grew by 25.9%, 13.64%, and 9.7% respectively, contributing 1.29%, 2.24%, and 0.64% to total export growth. Additionally, China’s exports to the EU are steadily recovering, up 8.57% year-over-year, positively contributing 1.43% to total exports.

Product-wise, China’s foreign trade structure continued to ascend the value chain, with high- and mid-end products performing strongly. In 2025, electrical machinery, mechanical equipment, automobiles, and ships remained the main export drivers, contributing 44.10%, 17.67%, 16.05%, and 6.99% respectively to total exports. Conversely, traditional light industrial products such as furniture, toys, and socks experienced significant declines due to tariff frictions and industrial chain relocation.

Breaking down by end-market, ASEAN absorbed Chinese industrial chain spillovers and trade re-exports, contributing major incremental exports across key commodities. Other emerging markets are also becoming new growth poles for China’s automotive, shipbuilding, and electrical industries. The reindustrialization and energy transition in Europe are driving demand for green industrial products, while aging populations are expanding China’s pharmaceutical imports. Beyond copper demand driven by market arbitrage, U.S. demand for key Chinese exports has shown varying degrees of decline.

2. High-Confidence Opportunities in China’s Outbound Chain in 2026

2.1 Global Supply Chain Reconfiguration

Amid normalized geopolitical competition, the global industrial system is undergoing a profound shift from “efficiency-first” to “security and independence,” which will continue to generate substantial demand for infrastructure and industrialization. Developed countries in Europe and America advocate for reindustrialization domestically and are shifting supply chains to emerging markets under the principles of “nearshoring” and “friendshoring.” Coupled with the Federal Reserve’s easing cycle, this will further unlock long-term financing and expansion potential in emerging markets suppressed by high interest rates.

In this context, China’s export structure has adapted accordingly: the share of consumer goods exports has narrowed, while intermediate and capital goods supporting global manufacturing supply chain rebuilding have gained dominance.

Benefiting from technological breakthroughs and scale effects, China has rapidly increased its market share in key industrial categories such as electric vehicles, batteries, semiconductors, ships, and machinery since 2018.

On the other hand, global supply chain reconfiguration has accelerated Chinese companies’ global capacity deployment. Based on the announcement of Chinese A-share listed companies establishing capacities or subsidiaries in ASEAN, India, and Mexico, the number reached 229 in 2025, nearly doubling from 2024. Chinese capacity going abroad is not merely a supply chain shift but an extension of domestic supply chains, requiring large imports of Chinese equipment during factory setup and ongoing imports of intermediate goods post-commissioning.

Main recipients include ASEAN, Mexico, and India. Data on import-export share changes and factory establishment show ASEAN’s comprehensive absorption of Chinese industrial spillovers across textiles, home appliances, consumer electronics, and automobiles. Mexico and India exhibit more sector-specific patterns, mainly involving automotive and consumer electronics supply chains respectively.

Overall, China’s manufacturing is increasingly intertwined with the current supply chain construction, making this deep linkage difficult to sever. Instead, it becomes more robust through outward expansion, further transforming China from a “final product exporter” to a “global provider of basic industrial infrastructure.”

2.2 AI Expansion Cycle

Supported by overseas economic conditions, AI hardware remains one of the core themes in China’s capital markets. However, since late last year, market concerns about the sustainability of the AI expansion cycle have persisted, mainly worries that overseas giants’ arms races in computing power and large-scale capital expenditures could strain corporate balance sheets.

Looking ahead, from macro investment scale, listed company financials, and liquidity environment comparisons, the AI expansion cycle still shows resilience and can support high growth in AI hardware.

On a macroeconomic level, despite a significant surge in capital expenditure in AI-related areas, the overall investment in computer, communication, data center, and information technology equipment as a share of U.S. GDP remains below the levels seen during the dot-com bubble.

At the listed company level, although tech giants have increased capital expenditure through debt financing, their balance sheets and cash flows remain healthy compared to the dot-com era. As of Q3 2025, the net debt-to-equity ratio and net debt/EBITDA of the S&P 500 information technology sector are lower than in the 1990s. Major tech leaders still have ample free cash flow to cover capital expenditures, with CAPEX-to-free cash flow ratios still below peak levels of the late 1990s.

In terms of liquidity, current conditions are significantly better than during the dot-com bubble: in 1999, the Fed raised interest rates rapidly, increasing financing costs and depleting cash reserves of internet companies. Currently, the Fed is in a rate-cutting cycle, and the risk of liquidity tightening hindering AI company financing in 2026 is low.

Furthermore, recent guidance from major tech giants indicates sustained high capital expenditure growth in 2026, driven by new industry technologies and demands. In 2025, leading cloud service providers increased their capital spending significantly, with total expenditures reaching $359.2 billion. In 2026, Amazon, Google, Meta, and Microsoft project combined capital expenditures of approximately $598.7 billion, a 67% year-over-year increase, reflecting strong demand for AI computing power under the arms race logic.

Meanwhile, the impact of high growth in AI capital expenditure is propagating upstream and downstream: upstream, soaring electricity demand for AI in the U.S. is boosting demand for grid and energy storage equipment; downstream, domestic manufacturing leaders are benefiting as AI hardware shipments continue to rise, with leading firms in humanoid robots and consumer electronics poised to gain.

2.3 AI Expansion Cycle

Beyond product exports and capacity spillovers, another major trend for Chinese companies going abroad is comprehensive cultural and technological value output.

Cultural exports include IP overseas (such as trendy toys and games) and lifestyle exports (new dining concepts, internet e-commerce).

• Trendy Toys: Leading companies like Pop Mart have successfully entered international markets through localized operations and innovative IP design. In H1 2025, overseas revenue share exceeded 40% for the first time, with overseas growth significantly outpacing domestic.

• Gaming: According to the “2025 China Gaming Industry Report,” China’s self-developed games achieved $20.455 billion in actual overseas sales in 2025, up 10.23% year-over-year, maintaining a billion-yuan scale for six consecutive years. Deep AI integration is reshaping production pipelines, accelerating content generation, and greatly improving localization efficiency, effectively reducing marginal costs of going abroad.

• New Dining: Brands like Mixue Bingcheng rapidly capture market share in Southeast Asia and nearby markets by offering high-quality, affordable new tea drinks, meeting local young consumers’ demand for fresh experiences and social spaces.

• E-commerce: Platforms like Temu and Shein leverage China’s strong light industry supply chains, adopting C2M (consumer-to-manufacturer) models to globalize the “fast, good, cheap, and efficient” value proposition. They export not only products but also China’s efficient fulfillment standards and recommendation algorithms.

Simultaneously, technological exports represented by innovative pharmaceuticals and BD are gaining attention. In 2025, China’s innovative drugs deeply integrated into the global industry chain, pursuing both independent exports and license-out strategies. Several new drugs achieved commercialization in the U.S. and Europe, with increasing transaction values and volumes, making China a key global supplier of innovative medicines. Looking ahead to 2026, more large-scale export opportunities for major products are anticipated.

3. Sub-sectors of Outbound Chain Worth Watching

Considering rising trade protectionism worldwide and the potential negative impact of RMB appreciation, we will select industries with high overseas profitability and strong willingness to expand abroad based on overseas gross profit margins.

Based on multiple factors such as overseas demand, gross profit margins, and factory construction, sectors like new energy vehicles (batteries, grid equipment), machinery (construction machinery, specialized and general equipment, automation), TMT (electronics, communications, gaming), as well as innovative pharmaceuticals, new consumer brands, shipbuilding, commercial vehicles, auto parts, and chemicals, all present relatively high-confidence outbound opportunities in 2026.

Within these sectors, we further analyze from the perspectives of existing orders and profit expectations to identify industries likely to see accelerated performance in 2026.

From the order perspective: using “contract liabilities + prepayments” as indicators of current orders. Historical data shows that the growth rate of non-financial A-share orders can serve as a leading indicator (ahead by 1.2 quarters) of performance growth, reflecting enterprise activity levels in advance. We focus on industries with high order growth in Q3 2025 and a positive trend in recent quarters.

From the consensus expectation perspective: based on Wind’s consensus forecasts, we highlight sectors with projected performance growth over 30% in 2026 and improvements compared to Q3 2025.

Finally, considering both 2026 performance prospects and current valuation levels, we emphasize investment opportunities in the commercial vehicle, battery, construction machinery, chemical pharmaceuticals, and gaming sectors.

Risk Warning

Unexpected changes in domestic and international economic data, and unexpected shifts in overseas trade policies.

(Source: Industrial Securities)